Technical Report: SATH Regional Price and Market Information Study

Transcription

1 Technical Report: SATH Regional Price and Market Information Study Gerrit Struyf and Eric Sommeling, Consultants Submitted by: AECOM International Development Submitted to: USAID/Southern Africa December 2011 USAID Contract No. 674-C DISCLAIMER The author s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. PO Box Plot 50668, Tholo Park, Fairgrounds Gaborone, Botswana Phone (267) Fax (267) [email protected]

2 TABLE OF CONTENTS TABLE OF CONTENTS... 2 LIST OF ACRONYMS... 5 EXECUTIVE SUMMARY INTRODUCTION REVIEW OF EXISTING PRICE AND MARKET INFORMATION SYSTEMS Desk Review of Regional Initiatives Zambia Initiatives ZNFU Introduction Analysis of the Quality of the System Efficacy of the Business Model AMIS Introduction Analysis of the Quality of the System Efficacy of the Business Model ZAMACE Introduction Analysis of the Quality of the System Efficacy of the Business Model TRANSZAM Introduction Analysis of the Quality of the System Efficacy of the Business Model E-extension (under development) Introduction Analysis of the Quality of the System Efficacy of the Business Model Malawi Initiatives ACE Introduction Analysis of the Quality of the System Efficacy of the Business Model ESOKO

3 Introduction Analysis of the Quality of the System Efficacy of the Business Model South African Initiatives Introduction AMT (AGINFO) Introduction Analysis of the Quality of the System Efficacy of the Business Model SAFEX Price/Market Information System Development Trends Conclusions General Conclusions, Not System Specific System Specific Conclusions IDENTIFICATION AND ANALYSIS OF INFORMATION GAPS IN ZAMBIA AND MALAWI Brief Value Chain Analysis of Selected Commodities Zambia Maize Legumes and Oil Seeds Vegetables Livestock Malawi Maize Legumes and Oil Seeds Vegetables Livestock Information Gaps Faced by Farmers Small-Scale Farmers Large Scale and Corporate Farmers Information Gaps Faced by Traders Small-Scale Traders Major Commodity Traders/Exporters/Processors Information Gaps Faced by Other Actors Finance Sector

4 Government Agencies RECOMMENDATIONS FOR PRICE/MARKET INFORMATION SYSTEM DEVELOPMENT Recommendations for Development of Regional Information Systems TRANSZAM Provision of Regional Information From Existing Systems on Commercial Basis Recommendations for Country Based Systems with Regional Replication Potential ACE ZNFU E-extension System ZAMACE ESOKO ANNEX 1: Detailed Description of E-extension system ANNEX 2: TRANSZAM Grant Concept Proposal ANNEX 3: Risk Management ANNEX 4: SATH Methodology for TRANSZAM Development ANNEX 5: SATH Methodology for AMT Development ANNEX 6: SATH Methodology for ACE Development ANNEX 7: SATH methodology for ZNFU Development

5 LIST OF ACRONYMS ACE Agricultural Commodity Exchange (Malawi) ACTESA Alliance for Commodity trade in Eastern and Southern Africa AGRA Alliance for Green Revolution AMD Agricultural Markers Division AMIC Agricultural Market Information Center AMIS Agricultural market Information System AMITSA Agricultural Input Market Information and Transparency System BVO Bid Volume Only CFC Common Fund for Commodities CFU Conservation Farming Unit COMESA Common Market for Eastern and Southern Africa COMRAP COMESA s Regional Agricultural inputs Program CSO Central Statistics Office DFID Department For International Development DMDO District Market Development Officer DRC Democratic Republic of Congo EAC East African Community EU European Union FEWS NET Famine Early Warning Systems Network FISP Farm Input Support Program FRA Food Reserve Agency GoM Government of Malawi GRZ Government of the Republic of Zambia HQ Head Quarters ICT Information and Communication Technology IDEAA initiative for Development and Equity in African Agriculture IFA International Fertilizer industry Association IFDC International Fertilizer Development Center IR Intermediate Result IT Information Technology M&E Monitoring and Evaluation MACE Malawian Agricultural Commodity Exchange MACO Ministry of Agriculture and Cooperatives MLI Market Linkage Initiative 5

6 MT NGO OVO QC RMM SA SACAU SADC SAFEX SATH SHEMP ADC SI SMS STTA TA ToR WFP ZAMACE ZNBC ZNFU Metric Ton Non-Governmental Organization Offer Volume Only Quality control Risk Management Matrix South Africa Southern African Confederation of Agricultural Unions Southern African Development Community South African Futures Exchange Southern Africa Trade Hub Smallholder Enterprise and Marketing Program Agribusiness Development Component Statutory Instrument Short Messaging Service Short Term Technical Assistance Technical Assistance Terms of Reference World Food Program Zambia Agricultural Commodity Exchange Zambia National Broadcasting Corporation Zambia National Farmers Union 6

7 EXECUTIVE SUMMARY The objective of the study is to identify and analyze sources of price and market information in key countries in the Southern African region. The analysis of the information systems focuses on the quality of their service offerings and the efficacies of their business models. The study also identifies price and market information gaps for the Southern African Trade Hub (SATH) strategic value chains as well as other staple foods and commodities. From the analysis, recommendations are made to SATH to encourage private sector/commercial actors to cover gaps in the market. Main Findings 1. Review of Existing Price and Market Information Systems Based on a desk review of regional price and market information system initiatives and an in-depth review of systems in Malawi, South Africa and Zambia, the following main findings are noted: General conclusions (not system specific) with regards to price and market information services reviewed (also in relation to viable business models) are: A number of information services, either country or regionally based and mostly government or donor funded, are operational in the region and provide relevant price and market information. Currently this information from different sources is not systematically collected, repacked and offered commercially to interested parties Most of the price and market information systems are based on the following 2 models: Price and market information is collected from the various traders/processors/exporters/etc. in the market. Price and market information are discovered from transactions over a commodity exchange. This type of price and market information is more transparent and easier to collect provided the commodity exchange is functional. The only price and market information system providing relevant information that operates on a sustainable business model is SAFEX. However conditions in South Africa diverge significantly from all other countries in the region. Replication of the SAFEX system in other countries requires not just the setup of an exchange but also the creation of an environment in which the exchange can operate. The exchange is extremely vulnerable to external factors which it has no or limited control. An exchange will have to successfully address the following external issues: Lobbying with government to change its policies in interference in the market. To date, this has not been successful in any of the countries. Lobbying with government to enact a legal framework (including certified warehouse operation) in which an exchange can operate; this is a very slow process. Establish warehouse operators and a warehouse receipt system, there are very few warehouses providing secure storage of products according to industry specification and/or warehouse receipt systems. This also must be connected to an exchange. 7

8 A price and market information system that is linked to a commodity exchange can only work if the commodity exchange itself operates satisfactory (high turnover, high number of transaction, and financially self-sustainable). Collection of actionable price and market information through an administrator- ZNFU 4455 or through enumerators-esoko is feasible and relatively cost effective. To get information to the end users (farmers, traders) through ICT, two methods were found: A SMS push system (ESOKO) provides a large number of persons with information, yet holds the following constraints: o Expensive, for example, to reach 20,000 users with 1 message will cost approximately US$1000. o Focused on an exclusive group with no market information available/provided to a larger community. o All users of the platform need to be registered. o Payment of subscription fees for individual farmers/traders (ESOKO bronze membership US$25/year) is not working in practice as the uptake has been very low and collection costs for subscription fees are high. o There is a need to regularly update the registry of users as there will always be a percentage of the phone numbers no longer used. This can be done if individual users have to pay for the service, which is currently not the case. A SMS pull system (ZNFU 4455), through which the user initiates access to collected market information. This is cost effective from a point of view of SMS costs (users pay), however has the following constraints: o Experience has shown that unless continued promotion takes place, the number of users will drop significantly. o High costs of promotion. o Major training on how to use the system is required, which is costly. o Revenue collection can be done through a revenue sharing agreement with a cell phone company. However revenue is small due to the limited number of messages and small fees charged. The limited number of messages through the system is due to the low repeat usage of the system and limited number of users that can be reached. A price and market information system that is only based on provision of price and market information (collected from various traders/processors/exporters/etc.) cannot provide a viable business model, particularly outside of South Africa, due to: Individual end users are not prepared to pay substantially for the information The cost of getting the information to the end user is high The bulk of end users (farmers) do only require market information for a limited period per year The following developments are currently underway: ESOKO is developing their system to provide a business tool to companies subscribing to the platform that will enable companies to communicate more effectively with their registered users (buying agents, distributors, farmers, etc.) ZNFU (E-extension system) is developing their information services in the following direction: o Provision of trading platform to farmers and traders o Communication system to farmers, companies and government (extension services) o Location based information system to farmers (events, etc.) o Market information 8

9 o Link to major mobile phone operator in terms of promotion costs and income generation of the system For the following systems that have at a business model, although they may not be viable, specific conclusions are noted: South Africa AMT: AMT is able to provide market and price information to a large customer base (banks, trading houses, magazines, etc.) based on subscription fees by South African based organizations AMT seems to operate on a viable business model Although AMT claims to provide regional agricultural data, in practice it limits itself to providing information on direct trade between South Africa and countries in the region. There is no information provided on markets in the AMT reports on market and price information and trends of countries in the region. AMT has the potential to collect regional market and price information from existing systems (ACE, ZNFU 4455, FEWS NET, etc.), repackage this information and offering it commercially to both SA based and Southern African regional customers. Zambia ZAMACE A number of key conditions for successful commodity exchange are not in place, including: o The Agricultural Credit Act has not been enacted through appropriate statutory instruments (SIs) making it difficult to operate certified warehouses. o Interference in the maize (main commodity) market through government programs. The business model depends on the volume of trade on the exchange. In its current format, the exchange does not generate enough revenue for its operational cost ZAMACE has been highly dependent on donor funding (USAID) and until the current restructuring exercise addresses business model issues/financial sustainability, it will not survive. Malawi ACE A number of key conditions for successful commodity exchange are operational, including: o It is possible to operate certified warehouses, however only 4 are operational o There is limited interference in the maize market through government ACE in its current operation is not able to be financially viable and will need to continue to rely on donor funding to operate. ACE is operating as a project and will need institutional anchoring for long term survival. The plan to increase trade and income for the exchange focuses on increasing the usage of the ESOKO platform to reach out to more traders and farmers. This appears to be unviable as the running costs of the additional services outweigh the expected incomes (i.e. the projected extra cost for the 20 call centers is US$120,000 while the projected total trade of the exchange is US$95,200.) Zambia E-extension 9

10 Currently in development phase and not yet operational yet there is active interest by MUSIKA (a Zambian agribusiness development program) to further develop the system nationally Goes beyond the provision of just market information, including communication tools, direct marketing tools, a trading platform, etc. Potential for a viable business model are in place (airtime, payment for business information, subscriptions by major companies/grz, etc.) The system is still in the development phase and will need to be properly piloted based on which national roll out/scaling up and regional roll out could take place Malawi ESOKO Off the shelf market information platform that requires minimum time to implement. The company, Wellspring, is still in the process of developing and exploring the business opportunities for the ESOKO platform in Malawi. There are a number of opportunities for the platform to create revenue, however for all of these opportunities it is still necessary to see if they will actually generate enough revenue to cover the platform and make a profit. If the current subscribers of the platform (a total of 12) would pay for the subscriptions, users could require a gold subscription (US$ 1500 per year), and the system would generate an income of US$18,000 per year. If the revenue from subscriptions is the main source of revenue, this would require a substantial increase in the number of subscribers. There is a large element of donor participation compared to private sector participation. The users of the system are mainly donor funded, with the advantage that these users are more likely to buy into the system and will also pay for additional services like training and other consultancy services required. Zambia TRANSZAM It is not possible to finalize conclusions as the system has been running for about 3 months and is in a testing/promotion phase Potential for a viable business model are in place (transporters paying subscription fees) Major income and business model success is likely to come from regional transporters who could make the business model viable. However more work will need to be done to develop TRANSZAM into a successful regional transport information system 2. Identification and Analysis of Information Gaps in Zambia and Malawi Based on the value chain analysis of SATH strategic crops and commodities, desk reviews and interviews of key parties that requiring market and price information are noted: Small-scale farmers lack information with regards to: Inputs: where to source, price and how to use some of the inputs and credit access Production: technical knowledge, post-harvest, product specifications required by market and location and access to service providers Processing and storage: storage options and storage knowledge Sales and distribution: finding transporters and making use of backloads Market: price information, product specifications required by market and where to find major traders and processors 10

11 Large scale and corporate farmers lack information with regards to: Processing and storage: storage options Sales and distribution: making use of backloads Market: some farmers sell to a brokers/traders based on relationship rather than price information Small-scale traders lack information with regards to: Processing and storage: storage options, storage knowledge and access to finance (warehouse receipting) options Sales and distribution: finding transporters and making use of backloads Market: location of small-scale farmers with good quantities for sale, prevailing prices in production areas, price information end users (processors, exporters, etc.), product specifications required by market Major commodity traders/exporters/processors lack information with regards to: Sales and distribution: making use of backloads Market: difficulty to access commodities more directly from small-scale farmers, prices of competition, import/export procedures and regulations and production forecasts both local as well as regional Recommendations for Price/Market Information Development Based on the main findings, the following recommendations are made to help encourage private sector and commercial actors to provide/further develop price and market information systems based on a business model. Recommendations for the Development of Regional Information Systems: TRANSZAM Actively pursue/support the further development of the transport platform TRANSZAM Support the implementation of the transport system TRANSZAM in the following areas: o Invest in the upgrade of the platform to include all countries in the region, considering the need for further expansion of functionality in the following areas: allow browsing using mobile phones, advertising on the platform and customer rating/reviews of transporters. o Promotion of the platform in the countries in the region: Tanzania, Malawi, Mozambique, South Africa, Namibia, Zimbabwe, DRC and Botswana. Provision of existing regional information on a commercial basis Actively pursue/support the information development whereby information from existing information systems operational in the Southern African region is systematically collected, repacked and offered commercially to interested parties. Engage organizations like AMT on a consultancy basis to review possibilities for the systematic collection of price and market information from existing regional information systems, repackage this information and possibilities to offer the information on a commercial basis to both SA as well as regional customers. Provide a competitive grant for the systematic collection of information from existing regional systems, repackaging and commercial offering of this 11

12 information to SA and Southern African regional customers. Potential organizations which could make use of the competitive grant include AMT, SAFEX and commercial banks. Recommendations for Country Based Systems with Regional Replication Potential: ACE Actively pursue/support the further development of ACE (including its price/market information system) Support ACE with the development of a market based (donor funding only for limited investments/start up costs) business plan for the organization. The development of the ACE business plan (including financing plan) will include the following aspects: o The development of the ACE business plan should be done by a highly qualified business consultant o The ACE business plan development should consider: institutional anchoring, strategic development, business plan, review of user charges, viable establishment of certified warehouse, access to ACE price/trade information to key stakeholders and earmarked support Based on the ACE business plan SATH may consider providing limited start up support for viable/sustainable ACE operation ZNFU E-extension system Actively pursue/support the development of the E-extension system in conjunction with MUSIKA Pursue the E-extension system in terms of supporting the implementation of a proper pilot phase/operationalization around 3 districts and making the pilot results relevant for a potential regional roll out of the E-extension system A number of key conditions linked to the development of a sound business model need to be fulfilled/confirmed: o Confirmation by the selected mobile phone provider that it will be possible to charge users o Revenue sharing agreement between Airtel and ZNFU that enables a viable business model Based on piloting, result effect changes on the E-extension system in terms of increasing the effectiveness of the system and the development of a viable business model Based on the piloting results (effectiveness of E-extension system and business model development), roll out the E-extension system nationally (all major agricultural districts) and review possibilities for regional roll-out ZAMACE It is recommended not to actively pursue/support the further development of ZAMACE Closely follow ZAMACE developments over the coming months and review progress in areas of; ZAMACE merger with Lusaka stock exchange, development of the agricultural credit act and involvement/interference of GRZ in the maize marketing (FRA operations, export bans, etc.) If substantial progress is made, reconsider possible support to ZAMACE ESOKO It is recommended not to actively pursue/support the further development of ESOKO 12

13 Closely follow ESOKO developments over the coming months and review progress in areas of: franchise development of Wellspring and ESOKO system information provision to farmers, traders, etc. in terms of business model development (shift from donor dependency to private sector income generation) If substantial progress is made, reconsider possible support to ESOKO to support business model development and upscale viable (private sector paid) ESOKO price/market information systems in Malawi and the region 13

14 1. INTRODUCTION The overall goal of the Southern Africa Trade Hub (SATH) is to increase international competitiveness, intra-regional and international trade and food security in the Southern African Development Community (SADC) region. Under SATH Objective 2 Increased Trade Capacity and Regional Value Chains and Intermediate Result (IR) 2.4: Increased Use and Availability of Trade-Related ICT Products, this consultancy has been engaged. This report is the final deliverable to identify existing sources of price and market information, analyze gaps in price/market information in key commodities, and recommend ways and interventions SATH can address gaps in price and marketing information. 2. REVIEW OF EXISTING PRICE AND MARKET INFORMATION SYSTEMS 2.1. Desk Review of Regional Initiatives There are a number of regional initiatives providing price and market information to the agricultural sector using ICT. Based on desk reviews, information is provided with regards to these systems concerning the type of information collected, the dissemination method, target groups, business model and analyze the quality of the service offered. Table 1 provides a brief overview of 13 price and market information systems reviewed and the regional and country specific systems are described in detail below. Regional systems As noted in the table, most platforms developed are at the national level and only two platforms, Agricultural Input Market Information and Transparency System (AMITSA) and Famine Early Warning Systems Network (FEWS NET), cover more than one country. AMITSA is also the only platform that provides information on inputs. Zambia systems In Zambia, there are currently three platforms running: the commodities exchange ZAMACE, the ZNFU 4455 market information system, and TRANSZAM, a platform linking the agricultural sector (and others) with transporters. Malawi systems In Malawi, there are three initiatives: the Agricultural Commodity Exchange (ACE), the ESOKO platform and a project called MACE/IDEAA. Kenya systems In Kenya, there are two initiatives: the commodities exchange KACE and NAFIS, an agricultural information platform of the government. It should be noted that KACE is based on the same design as the exchange in Zambia and Malawi. NAFIS is an agricultural information system of the Kenyan Government, available for free. Except for providing market and price information, the platform is designed as a tool for the extension service of the government. Characteristics of NAFIS include: Government extension service Electronically generated voice information service available in English and Kiswahili languages No additional charges beyond the normal telephone and internet charges The system provides general information on crops, livestock and market prices, including inputs, services, produce and products 14

15 The information is collected through the government extension services whereby field officers upload the data using an internet based menu system Uganda systems In Uganda, there are two platforms operating that provide market and price information: the exchange, UCE, and INFOTRADE. UCE is based on the same design as the exchange in Zambia and Malawi. INFOTRADE is a project initiated by Agricultural Sector Program Support, the agrobusiness division of DANIDA and FIT Uganda, Ltd., the private partner running the platform. The platform provides information on market prices for 46 commodities in 22 markets. The information is provided free to users, and the information can be accessed weekly and in the annual Agricultural Market Report. This information is also sent to 18 radio stations in the country and displayed on notice boards in the markets. The information is accessible by SMS text messages by sending a SMS message to the platform with the information requested. South African systems In South Africa, a large number of players provide market and price information to the industry: the commodity exchange, SAFEX, for following commodities traded over on the exchange: white and yellow maize, wheat and soya beans and cake. COMMODITYINSIGHTS is a web based news information platform based in India. The website gives real-time news, analyses and price data from Indian commodity exchanges, MCX and NCDEX, along with trade information generated by their own research team. General information on the website is free and more detailed information is provided on a subscription basis. The information provided is live data from the commodity exchanges MCX and NSDEX, various price charts and economic articles on base and precious metals, oil prices and agricultural commodities. Price information is provided from the commodity exchanges MCX and NSDEX for Barley, castor oil seed, Copper, Coriander, Cotton seed cake, Crude oil, gold, guar seed, maize, pepper, potato, silver, etc. For the website COMMODITYINSIGHTS no further detailed information will be provided as it focuses mainly on the Indian market. Table 1: Summary of price and market information systems Name Country Description AMITSA Regional Is run by international fertilizer development center (IFDC) Provides price information on inputs Free service There is no business model as the platform is a public service Information is available on the internet; are in the process of implementing ESOKO platform to distribute their data FEWS NET Regional USAID funded activity/project Early warning/vulnerability information on emerging and evolving food security issues Local market and cross border markets price information on major food crops Free service There is no business model as the platform is a public service Information is available on the internet 15

16 ZNFU 4455 Zambia Run by the Zambia National Farmers Union Provides buying prices and contact details of companies buying produce To access information the user pays for a SMS text message. There is no business model as the information is a public service. Information is available through mobile phone by SMS text messages and on the internet ZAMACE Zambia Is run by the commodity exchange, ZAMACE. Provides transactions over the exchange and the bids on the exchange. Users pay a commission on trade; the trade information is available on the internet for free. Based on the fees charged to trade over the exchange Information is distributed by to a mailing list and available on the internet TRANSZAM Zambia Is run by the Zambia National Farmers Union Provides offers on goods to be transported and offers on empty backloads. Transporters pay an annual user fee; to promote the platform it is free for the first 6 months. Fees from the transporters subscribing to the platform Information is available on the TRANSZAM website MACE/ IDEAA Malawi Is run by a 5 year project by MACE, funded by Initiative for Development and Equity in African Agriculture (IDEAA) Provides collected prices of commodities in 13 markets and submit offers to buy or sell in 45 markets Users get the information for free Based on brokerage fee charged when linking buyer/seller. User get access to the information by SMS and can send offers through SMS; there is also a radio program where users can submit offers ACE Malawi Is run by the commodity exchange in Zambia Provides transactions over the exchange and the bids on the exchange. Users of the exchange pay commission on trade; the trade information is available on the internet for free. The exchange uses the ESOKO platform to disseminate trade opportunities to registered traders and farmers. Based on the fees charged of trade over the exchange Information is available on the internet and SMS text messages are sent to registered users. ESOKO Various countries in Africa Including Malawi Is run by ESOKO Networks (Ghana), the platform was introduced in Malawi by MLI. The company, Wellspring, acquired the franchise to run the platform in Malawi and will be running the platform from the end of Provides information on commodity prices and price offers Corporate users pay subscription to communicate with registered individual users. Individual users can subscribe to market information for certain products. Based on company and individual user subscriptions. Other potential revenue streams are still in development; these are revenue from consultancy service and selling market information to other parties like financial institutes. Currently 11 organizations/companies subscribe to the system (paid for by the MLI). Two organizations have paid themselves. 16

17 Subscriptions are paid yearly. No individual users have subscribed to the platform; charging individual users is a challenge in terms of fee collection and willingness to pay for the information. The other revenue streams still have to be developed. Information is available by SMS text messages and on the internet. KACE Kenya Run by the Kenya commodity exchange Provides information on transactions over the exchange and the bids on the exchange. Users of the exchange pay commission on trade Based on the fees charged of trade over the exchange Information is available on the internet, interactive voice response using phones, SMS text message using a subscription, 5 market information kiosks NAFIS Kenya Run by the Kenya Government Provides information on price information and production information on Dairy Cattle, Dairy Goats, Bee Keeping, Maize Production, French Beans, Tomatoes, Grain Amaranth, Indigenous Chicken, Layers, Broilers, Ostrich farming, Fruits, Mangoes, Sweet Potatoes Free service No business model, is a public service Information is available on the internet and by phone, voice interactive. UCE Uganda Run by the Uganda commodity exchange Provides information on transactions over the exchange and the bids on the exchange. Users of the exchange pay commission on trade Based on the fees charged of trade over the exchange Information is available on the internet Infotrade Uganda Run by FIT Uganda Ltd and the Agricultural Sector Program Support, the agro-business division of the DANIDA Provides market information on 46 commodities in 22 markets. Information is free No business model Publishing of weekly and annual Agricultural Market Report, sends information to 18 radio stations, SMS messages, Notice Boards in markets SAFEX South Africa Run by the commodity exchange in South Africa Provides information on transactions over the exchange Users of the exchange pay commission on trade Based on the fees charged of trade over the exchange Information is available on the SAFEX website and through agricultural business houses Agricultural business houses (Afgri, SENWES) South Africa Run by the companies Provides latest market prices Users receive this information for free as they are clients to the business houses. Agricultural business houses provide market information as a service to their clients. Information is available by and on a mobile phone application The South Africa A pilot project started in 2004 whereby about 100 farmers 17

18 Makuleke Project receive market information on their internet enabled mobile phones The service is free (farmers only pay for their cell phone subscriptions). In future the project would like to change to a subscription-based model in which farmers pay a set fee and can then use the service as much as they want. If successful plans to roll-out similar projects across SA and the rest of Africa. Does not seem to have gone beyond pilot phase, no further information found on the up scaling of continuation of the project. Some of the information platforms are designed as a public service and are funded by donors or national governments. Other platform are based on a business model by either providing the information at a cost for the end user or providing the information for free, but linking the user of the information to a company. Detailed description of AMITISA Name and details service Name: Launch date: November 2009 Country: Website: AMITSA (Agricultural Input Market Information and Transparency System) Burundi, Kenya, Malawi, Mozambique, Rwanda, Tanzania, Uganda, Zambia (Hosted in Kenya) Contact details: AMITSA Coordination Supporting organizations c/o IFDC, East and Southern Africa Division, ICIPE Campus, Kasarani, Off Thika Road. P. O. Box , Nairobi, Kenya Tel: / F: [email protected] IFDC (international fertilizer development center) EAC (East Africa Community) COMESA (Common Market For Eastern and Southern Africa) Partnerships in data collection Croplife (global federation representing the plant science industry) IFA (International Fertilizer Industry Association) AFSTA (African Seed Trade Association) COMRAP (COMESA's Regional Agricultural Inputs Program) STAR (Strengthening Trade in Agricultural Inputs at a Regional Level in Africa) ACTESA (Alliance for Commodity Trade in Eastern and Southern Africa ) AGRA (Alliance for a Green Revolution) ESASA (Eastern and Southern Africa Seed Alliance) 18

19 CATALIST (Catalyze Accelerated Agricultural Intensification for Social and Environmental Stability) EADN (Extending Agro-input Dealer networks) Description of the service A web based input market information system that addresses the lack of information about agro-inputs. The objectives of the system are to: Improve access to timely data and information describing agricultural input markets for the benefit of all stakeholders, farmers, traders, manufacturers, etc. Establish business linkages developed among agricultural input importers from different countries and regions and international input manufactures and traders Reduce input procurement costs Increase the use of inputs thereby increasing agricultural productivity Improve food security and accelerate economic growth AMITSA described itself as: in its growing phase, both geographically and in terms of contents and services. It was established in 2009 to fill a major void on information on agro inputs (fertilizers, seeds and pesticides), and built to complement / interact with other existing and new MIS, whether private or public, national or regional, commodity-based or not. We see ourselves as catalysts for various efforts in SSA in this field, rather than primary producers of market information. The information collected is: Monthly international prices of fertilizer Monthly prices of fertilizer in the participating countries Monthly prices of about 10 pesticides in the participating countries Monthly prices for legume bean and hybrid maize seed Annual production capacity for fertilizer in the participating countries Annual national import, export and consumption of fertilizer in the participating countries The prices for fertilizer, pesticides and seed are retail prices collected from a number of retails shops. This data is averaged and published in monthly price reports. Other data are a list of contact details of various companies and organizations in the participating countries. Collection method Data is collected using the participating organizations. This information is requested in an to the organization. The target group The system defines its target group as all stakeholders: farmers, traders, manufacturers, etc., however looking at the information provided by AMITSA, the most likely users of the data would be: Large scale farmers Large scale traders Government Financial institutions Processors 19

20 Usage of the data The target of AMITSA is all players in the chain, policy makers, academia, agro input trade/farmer associations, individual traders /farmers, development partners, etc. There is no information available on the usage and impact of the platform. AMITSA has not carried out an assessment on the number of users that access the information or an impact assessment of the platform. When contacted, AMITSA indicated that they are thinking of using Google analytics to monitor the number of users. AMITSA has also contracted ESOKO to provide information to users on the ESOKO platform. They have completed the integration of the mobile phone service on AMITSA for data collection and SMS push information sharing, SMS alerts, price search, etc. The aim is to roll this out to farmer associations and partners on the ground. To date, there are no users setup on the platform. To summarize, the system can be used for: Trading: Price discovery Contacting suppliers: Buying: Selling: Planning: Statistics: Actionable data: Dissemination of the data No Yes Limited, there is a very limited list of companies and organizations in the system Limited, there is a limited list of companies and organizations in the system No Yes Yes The system provides all the data on the internet. No, the information provided is more for planning and statistical use AMITSA has also contracted ESOKO to provide information to users on the ESOKO platform. They just finished the integration of the mobile phone service on AMITSA for data collection and SMS push information sharing, SMS alerts, price search, etc. The aim is to roll this out to farmer associations and partners on the ground. To date, there are no users setup on the platform. Cost of the service for the end user There are no charges to access the data. Usage and Impact of the system There is no information available on the usage and impact of the system Business model AMITSA noted it is not a business, but a public information platform for all. Capacity hosting organization AMITSA is an initiative at IFDC and is not a project. It has several partners involved at the national and regional level to ensure its continuity and successful implementation. 20

21 Detailed description of FEWS NET The Famine Early Warning Systems Network (FEWS NET) is a USAID-funded activity that collaborates with international, regional and national partners to provide timely and rigorous early warning and vulnerability information on emerging and evolving food security issues. FEWS NET professionals in Africa, Central America, Haiti, Afghanistan and the United States monitor and analyze relevant data and information in terms of its impacts on livelihoods and markets to identify potential threats to food security. The FEWS NET project in its current format will end at the end of From the meeting with FEWS NET at the Zambia office it was noted the project will continue, however there could be some changes but details were not available. The information collected by the FEWS NET office in Zambia are retail prices for white maize and maize meal in the most important markets of Zambia, received from the National Statistical Office. FEWS NET also collects information on the trade volumes across the main borders in the region and prices at the borders. This is done by enumerators employed by FEWS NET. At one point, there were negotiations between ACTESA and FEWS NET on the option of ACTESA taking over this role. However this did not materialized due to internal management issues at ACTESA. The reports generated by FEWS NET are on agro-climate monitoring, markets and trade and livelihoods. Agro climate monitoring reports The agro-climate monitoring information provides weather reports that focus primarily on areas that experience either droughts, flooding or other weather conditions that could affect production and food security. The livelihoods information reports The livelihoods information provides analysis with a means to predict and judge the impact of a shock on household income and food access. Markets and trade information reports The markets and trade information provides a number of reports for various regions including West Africa, East Africa and Southern Africa. The information provided is country and region specific. The market and trade reports generated by FEWS NET are: Price Watch reports: Price Bulletins reports: Regional Market Reports: The price watch reports give retail price information on the most important food crops, white maize, wheat, rice and beans. Additionally a brief explanation is provided explaining price trends. The reports are made for West, East and Southern Africa and are published monthly. Retail price statistics over the last year for the most important food crops and market(s) in the country. This is carried out for most countries in Southern and Eastern Africa. The bulletins are published monthly. Reports on regional markets, and cover only East Africa. However information is out of data; the last report was for June

22 Cross Border Trade Reports: Very detailed information on informal trade volumes and prices of white maize, rice and beans between various borders of Malawi, Zambia, DRC, Zimbabwe and South Africa. Conclusions of the service Although the main task of FEWS NET is to operate as an early warning system for food security it does create some valuable market information reports. These reports are for the main food crops and contain the retail market prices in the main markets. Additionally the reports provide information on informal trade volumes across the borders in the Southern African region. FEWS NET provides no information on production or stock levels in the various countries. The information provided by FEWS NET is especially important and useful for government agencies and organizations like the World Food Program. The information provided by FEWS NET is also useful for the private sector by providing a quick and detailed overview of price trends (retail prices) in the region and information on the factors that affect prices and (informal) trade across borders. These factors can be weather conditions, structural problems in an area or government policies such as import or export bans Zambia Initiatives There are currently 4 price and market information system/sources in Zambia and one in development: ZNFU4455 SMS based market information system operated by the Zambia National Farmers Union. Agricultural Market Information System (AMIS) operated by the Agricultural Market Information Center (AMIC) under the Ministry of Agriculture and Cooperatives. The Zambian Agricultural Commodity Exchange (ZAMACE). TRANSZAM, a web based transport system operated by the Zambia National Farmers Union where the agricultural sector (and others) are linked to the transport sector. E-extension system a new cell phone base platform for the agricultural industry being developed by the ZNFU. There are other sources of information available to the agricultural sector, but they provide general information or are used only for statistical purposes: The ZNFU Friday brief, a weekly news bulletin send by to all Zambia National Farmers Union members with news, updates and information about the agricultural sector. Data from the Central Statistical Office (CSO), including retail data to produce the consumer price index ZNFU Introduction The Zambia National Farmers Union Market Information System or ZNFU 4455 was designed in 2006 with the assistance of the Agribusiness Development Component (ADC) of IFAD s Smallholder Enterprise and Marketing Program (SHEMP). 22

23 The ZNFU4455 is an SMS based market information system/service. The system is well documented with information about and usage of the system available from the ZNFU Analysis of the Quality of the System Name and details service Name: ZNFU 4455 Launch date: 2006 Country: Website: Contact details: Zambia Description of the service: Zambia National Farmers Union (ZNFU) Tel / Fax ZNFU Head Office Showgrounds Lusaka, Zambia ZNFU 4455 is an SMS based Market Information System developed by the ZNFU available on the Airtel network. The system provides buying prices and contact details of companies. To receive information, users send a SMS message to the number 4455 on the Airtel network; the system will send back the requested information. This type of system is referred to as a pull system. The total number of companies listed in the system is over 200 and the buying price for 16 commodities listed in the system are: -Maize -Soybeans -Beef -Groundnuts -Goats -Rice -Cassava -Honey -Sheep -Sunflower -Wheat -Cowpeas -Beans -Pigs -Sorghum -Jatropha Price collection is done weekly as companies set their prices at the beginning of the week (normally Monday) and prices do not change over the course of the week. Buying prices To receive the buying prices for the commodities in the system, the user sends the first four letters of the commodity to the number 4455 on the Airtel network. The reply message of the system will be the buying prices (highest price first) from the companies listed in the system. To receive only the buying prices of companies in a district or province, the user would send a SMS message with the first four letters of the commodity, space, and the first four letters of the province or district. For example, if one sends maiz to the system, the system will reply with the following message: 40 buyers in Zambia. Prices per Kg: gzfompi Chcchi Natilsk Chcndo Chclsk Afgrlsk 950. supelsk 950. Nachlsk 920.cypndo

24 Explanation of the reply message: There are 40 companies listed in the system that are buying maize; the best prices are from the companies gzfompi buying at Kw 1200 per Kg, chcchi buying at Kw 1100 per Kg, etc. Contact details To receive the contact details of a company, the user has to send the name of the company to the number 4455 on the Airtel network. From the above example the highest price is offered by the company gzfompi. If the users send gzfompi to the system, the system will reply with the following message: Gzfompi , GZ Foods, Behind CR bus stop, Mpika. Contact Mr Katongo. Buying Cassava, Soybeans, Beans, Maize and pigs. The information collected The information collected is: Contact details of the companies Buying prices of the companies in the system The information is mainly collected from larger traders who are able to buy considerable quantities. Collection method The price collection is conducted weekly by phoning the companies or by . Prices are collected weekly as companies set their prices at the beginning of the week (normally Monday) and these prices do not change over the course of the week. The reason why companies do not change their prices during the week is that it gives the seller time to deliver the produce for the set price. However, there have been exceptions during periods when companies heavily compete with each other to buy produce. As soon as one company increased its price, other company would do the same. During this period each company would phone the systems administrator to update the price. It could happen that a company would change its price more than once a day as the companies also use the system to check on each other s prices. The target group The main target groups are small and medium scale farmers, small traders and large traders. The small and medium scale farmers use the information to negotiate prices with local traders and to find a market for their produce. The small scale traders use the price information to sell to larger traders listed in the system and to set prices when they buy produce from farmers. The large traders use the platform to buy produce and to find competitors prices. Usage of the data Three groups of users use the system: farmers, small traders and the large traders. Farmers 24

25 From the usage and attitude study, it was found that of the farmers surveyed: 40% reported that they could negotiate better prices; 52% now sell to different buyers; 21% now bulk products before they sell to a buyer; 23% have built new trading relationships; Over 50% claimed to have increased their incomes, and; Over 30% have increased confidence to grow cash crops/rear animals. It is estimated that more than 15% of SMS messages lead directly to farmers selling their produce. Small traders Small traders use the system to: Find markets for the commodities they trade in. Find prices for which they can sell their products See which commodities provide them with the highest margins Large traders Large traders use the system for: Procuring produce Finding prices of the competition To summarize, the system can be used for: Trading: Price discovery Contacting suppliers: Buying: Selling: Planning: Statistics: Actionable data: Dissemination of the data Yes Yes Yes Yes Yes Yes Yes Yes, enables farmers to see the buying price and contact companies. By SMS message or on the internet: Cost of the service for the end user Cost of a SMS message or an internet connection fee. Requirements to run the ZNFU455 service To run the ZNFU4455 service, the following elements are needed: The organization running the system has to be a trusted partner for the participating companies and users of the system. The system needs a full time systems administrator to update information in the system and provide user assistance. 25

26 The organization running the service has to have enough resources to cover the costs of running the service. The technical requirements for running the system are minimal: Software: the software is a database with the information of the buyers, commodities and prices. There are basically two software modules that link to the database. The first module is the administrator interface for updating and managing the system, and the second is the interface between the database and the Airtel SMS gateway. Hardware: there is no special hardware needed to run or host the system as it is hosted with an internet hosting company. The Airtel SMS gateway can access the data over the internet. Communication: the communication needs of the system are an internet connection for the system operator and a cell phone for the phoning companies for prices. Usage and Impact of the system The usage of the system can be derived from the log file of the system where all messages going through the system are recorded. The number of unique users of the system and the number of requests for the year 2010 and 2011 (until mid-september) are: Unique users in 2010: 3554 Total request in 2010: 8495 Unique users in 2011: 3228 Total request in 2011: 5768 An impact assessment was conducted about 6 months after the system was launched; it was found that the system is very effective in providing accurate price information and actionable data to small scale traders and farmers. It is used by companies and traders to buy produce from small scale farmers and for checking prices of the competition. The system will drive up prices when there is a shortage in the market as companies daily increase prices to buy produce. Because users have to pull data from the system, the system requires promotion to notify users of the system and on how to use it, especially as farmers will use the service primarily during the marketing period. It was found that there is a large increase of usage when the system is promoted. From the usage and attitude study it was found that of the farmers surveyed: 40% reported that they could negotiate better prices; 52% now sell to different buyers; 21% now bulk products before they sell to a buyer; 23% have built new trading relationships; Over 50% claimed to have increased their incomes, and; Over 30% have increased confidence to grow cash crops/rear animals. It is estimated that more than 15% of SMS messages lead directly to farmers selling their produce. Marketing of the service In order to promote the system, the ZNFU initially used various extension services available in the country to train farmers on the usage of the system. Subsequently the system is promoted whenever the ZNFU is present during agricultural shows or other 26

27 events. During these events, credit card size plasticized cards with the instructions on how to use the system are distributed. Before the marketing season the ZNFU promotes the system using local radio stations to reach the rural communities. At the end of last year, Airtel was also involved in the promotion of the service by sending bulk SMS messages to Airtel users. This resulted in an increase in the usage of the system. However the information in the SMS message was not sufficient for users to understand how to use the system. Another issue in the usage and promotion of the system is that people will mainly use the service during the marketing season. This results in a large drop in the usage of the service outside the marketing season. Lessons learned on the promotion and usage of the system: Without promotion the usage of the system will gradually drop Promotion of the system has to be repeated every year before and during the buying season Distribution of the plasticized credit card sized instructions is an effective way to promote the service The cost to promote the system is high comparable to the cost of running the system Usage of the service is primarily during the marketing season Capacity hosting organization The ZNFU is a strong organization with about 600 commercial farmer members, 67 district farmers associations with about 60,000 members, the commodity associations with a total of about 200,000 members, 41 corporate members and 20 agribusinesses. The ZNFU has 63 staff members. Other services provided by the ZNFU: Lobbying and advocacy Access to GRZ Farm Input (FISP) and marketing (FRA) programs Training programs for small-scale farmers Lima scheme, a loan scheme for small and emergent farmers The ZNFU is approximately 50% donor-funded with the aim to have at least 75% of its income originating from non-donor sources in the next 2-3 years. ZNFU core expenditures are expected to be fully self-financed, while donor support can be used for specified program (focus on small-scale farmers) implementation activities. It is currently developing the following sources of income: Increased small-scale farmer membership contributions though annual fees, service charges (LIMA scheme, etc.) Agricultural industry and farmer support for ZNFU lobby work though sponsorships, etc. ZNFU is a shareholder of ZANACO (+/- 5% of shares), providing dividend income Income from members access to markets ($5/tonne for large scale farmers early maize supply to FRA) Development of infrastructure for lease such as Agricultural Service Centers and an office block development in Lusaka Conclusion with regards to quality of the system 27

28 The ZNFU 4455 is a useful market information system for small and medium scale farmers and for small and large traders. It provides actionable and timely price information on the buying prices of traders in Zambia. The system is designed in such a way that data collection is done at a minimum cost and can be done by one system administrator who does not need more than two days a week to collect prices. The low cost of data collection makes the system sustainable as it does not generate any revenue. Looking at the number of unique users of about 3,500 per year and the total number of price request of over 8,000, it can be argued that the system only reaches a small percentage of the total number of farmers. In order to maintain or expand the user base, there is a continued need for advertisement, printing of laminated cards and training of farmers. However the promotional activities are limited due to the high cost involved Efficacy of the Business Model Business model The ZNFU 4455 service is a service from the ZNFU to the farming community in Zambia, with running costs completely funded by the ZNFU. The system does not generate any income for the ZNFU. The ZNFU has been able to run the service for 5 years as the running costs of the system are relatively low. The estimated cost of maintaining and operating the ZNFU 4455 service is approximately US$13,000 per annum. This includes the administrator s salary and communication cost, but excludes any on-going awareness campaigns to support service extensions and to remind (potential) clients of the service ahead of the key marketing seasons. Conclusions with regards to efficacy of the business model There is no business model for the running of the ZNFU 4455 service; it is purely a service to its members. However the ZNFU is currently developing an E-extension service with the potential of generating income for the farmers union AMIS Introduction The Agricultural Market Information System (AMIS) is operated by the Agricultural Market Information Center (AMIC) under the Ministry of Agriculture and Cooperatives. The AMIC headquarters was setup in 1992 to collect weekly retail and wholesale prices for a range of commodities from the nine provincial headquarter districts Analysis of the Quality of the System Name and details service Name: Launch date: 1992 Country: Agricultural Market Information System (AMIS) Zambia 28

29 Website: Contact details: Description of the service Reports can be downloaded from: mic/index.htm Mulungushi House, Room G7 Tel/Fax The AMIC headquarters was setup in 1992 to collect weekly retail and wholesale prices for a range of commodities from the nine provincial headquarter districts. The other 63 districts are encouraged to collect similar information, however the collection and transmission of the data is highly irregular. In principle, AMIC covers retail, wholesale, and farm gate prices, but only a fraction of this data is collected. While both wholesale and retail markets should be visited, only retail traders are consulted and few districts collect or report any data at all. Smallholder farmers and small-scale traders are considered to be the primary clients of AMIC yet the focus is mainly on government institutions. A short list of wholesale and retail prices for each of the nine provincial headquarter districts are broadcast weekly on ZNBC Radio 2; the reported prices are widely considered to be unreliable. A bulletin is distributed by to a short list of subscribers, mostly within government, and can be downloaded from the internet. Due to limited resources and technical software problems, there has not been a bulletin for the last 18 months. Capacity hosting organization The capacity of the Agricultural Market Information Center (AMIC) is very limited. There are currently four vacant positions and funding is limited. The following weakness should be noted: Under staffed Under funded Market Development Officers have received no training Little or no guidance about data collection approach Various data collection templates are used Poor reporting structure Data cleaning and verification are not done The information collected AMIC covers retail, wholesale, and farm gate prices at each marketing level yet only a fraction of the data is collected. While both wholesale and retail markets should be visited, only retail traders are consulted with few districts collecting or reporting any data. Collection method At the district level, District Market Development Officers (DMDO) collect weekly retail prices from traders in the retail markets. The target group 29

30 In theory, the target groups are the small scale farmers however the information is mainly distributed to other government agencies. Usage of the data The usage of the data is limited; there is no evidence that the data is used by the private industry and is primarily distributed to government departments. To summarize, the system can be used for: Trading: Price discovery Contacting suppliers: Buying: Selling: Planning: Statistics: Actionable data: Dissemination of the data No Yes, however the reported prices are widely considered to be unreliable. No No No Yes Yes No A short list of wholesale and retail prices for each of the nine provincial headquarter districts are broadcast weekly on ZNBC Radio 2. A bulletin is distributed by to a short list of subscribers, mostly within government, and can be downloaded from the internet. Due to the limited resources and technical software problems, there has not been a bulletin for the past 18 months. Cost of the service for the end user No cost. Usage and Impact of the system Because the data is unreliable and infrequently collected, it is of little use to the commercial sector, and no references noted that the data is used by any commercial player. It is not clear how the data is used at the government level. Conclusion with regards to quality of the system The quality of the AMIC system is very poor including data collection, collection methods, data verification and dissemination. The reported prices are widely considered to be unreliable and there were no references found of any use of the data Efficacy of the Business Model Business model There is no business model for the AMIS; the system is a public service from the Ministry of Agriculture and Cooperatives ZAMACE Introduction 30

31 ZAMACE, the Zambian Agricultural Commodity Exchange, was established in 2008 with financial and technical support provided by USAID/PROFIT, and a price/market information system is embedded within the exchange operations. The exchange has currently scaled down its operations as there were no trades conducted for the last few months. To address the issue of low volumes traded, the exchange is restructuring. It is expected that the exchange structure of ownership will change and will bring in new partners such as the Lusaka Stock Exchange. The operation and volumes traded are well documented; the current issues facing the exchange are reported in a study conducted by Nicholas J. Sitko and T.S. Jayne Analysis of the Quality of the System Name and details service Name: Launch date: 2008 Country: Website: Contact details: Zambian Agricultural Commodity Exchange (ZAMACE) Zambia Description of the service FRA Depot, Mwembeshi Road P.O Box 51373, Lusaka, ZAMBIA Tel [email protected] ZAMACE is currently owned by 15 members who are also the exchange brokers. It has a board with one independent chairman seat, 8 members, 3 institutional board members (ZNFU, Millers Association of Zambia, Bankers association of Zambia) and 3 External board members. There are 6 total staff members. ZAMACE provides three services: commodity trading platform; setting grades and standards; and, providing warehouse certification. 1. Commodity Trading Commodity trading is conducted through the member-brokers of the exchange. The minimum quantity that can be traded on the exchange is 30MT with daily trading sessions between hours. The trading on the exchange is as follows: An offer to sell is instructed to one of the member-brokers on the exchange The offer position is posted on the exchange by the member-broker This offer position is published on the exchange daily report A buyer interested in the offer issues a buy instruction to a member-broker of the exchange A bid position is placed on the exchange This bid position is published on the exchange daily report Negotiations between the selling and buying member-broker will lead to a trade 2. Setting grades and standards ZAMACE has: and Standards 31

32 Developed quality standards, acceptable to and recognized by the agricultural industry Harmonized wheat standard with SAFEX standard; all exchange contracts adhere to these standards Laboratory service for independent quality testing 3. Warehouse certification The warehouse receipt system enables ZAMACE to certify warehouse operators by issuing a warehouse receipt with proof of title for commodities deposited in a ZAMACE certified warehouse. The exchange provides a trading platform for sale of underlying commodities. The role of ZAMACE in the warehouse receipt system is: Train and certify warehouse operators to manage, grade and store commodities Identify and inspect storage in districts to develop the warehouse receipt system Provide operating, storage and documentation procedures Provide robust certification, oversight and inspection role Maintain database of all documentation. Authorize any withdrawals from the warehouse There are currently no ZAMACE certified warehouses in place. In order for a warehouse receipt system to work, the agricultural credit act needs to be enacted through a number of statutory instruments. The study by Nicholas J. Sitko and T.S. Jayne, Constraints to the Development of Commodity Exchanges in Africa: A case study of ZAMACE, notes the following factors limiting ZAMACE development: High risk of contract non-compliance Potential conflict of interest associated with traders acting as brokers on the exchange Cost of running of the exchange spread out over low volumes of the exchange Vulnerability of the exchange to market manipulation due to market thinness (low number of actors and low trading volumes) Inability of the exchange to attract financial institutions to commit to the exchange Ad hoc and unpredictable nature of government interventions in the commodity markets. The study also provides a list of recommendations to encourage greater participation 1 : Arbitration reforms to provide effective dispute resolutions to the users of the exchange Encourage the use of settlement guarantee facilities Develop statutory instruments that make trades conducted on the exchange legally binding Outreach efforts with commercial farmers and medium scale wholesalers to use the exchange Policy advocacy towards government interference in the commodity markets 1 The SAFEX has experienced similar problems to get trade on the exchange for sorghum and millet. For these two commodities, there are a small number of processors, traders and producers who prefer to stick to established ways of trading outside the exchange. This could indicate that there is a structural problem to make the exchange successful in a market with few players. 32

33 Work towards a regional exchange to increase market size, liquidity and competiveness The information collected Offers on the exchange are collected and published in the exchange daily, weekly and monthly reports. Collection method The offers are conducted over the exchange. The target group The target groups of the exchange include: Large scale farmers Large traders Medium traders Processors Usage of the data The data is primarily requested and used by the large scale farmers in the agricultural sector who use the price reports as a reference when selling their produce to traders, yet seldom use the exchange to sell their produce. Traders also use the price reports from the exchange as a reference when trading commodities. To summarize, the system can be used for: Trading: Contacting suppliers: Buying: Selling: Planning: Statistics: Actionable data: Dissemination of the data Yes No Yes Yes Yes Yes Yes Data is available on the ZAMACE website and price reports are ed to users in the mailing list. Cost of the service for the end user The information is available at no cost on the ZAMACE website. To trade, the user will have to pay a broker, and the exchange charges a 0.15% fee for both selling and buying offers. Requirements to run ZAMACE The main requirements for the exchange are to: Guarantee successful transaction Guarantee physical stock Guarantee available funds In order to achieve this, the following is required: 33

34 Certified warehouses Legislation, enactment of the agricultural credit act to operate the certified warehouses and to issue warehouse receipts Uniform system of grading Quality control of the stocks Agreed upon standards Minimal to no government intervention in the market or predictable government interventions Support from the financial sector Usage and Impact of the system The current volume of trade and number of trades is very low with only a relative small number of traders. The exchange reported a total of US$72.2 million in trade on the exchange since its inception in 2008 through the fourth quarter of As brokers cannot mandate their clients to trade over the exchange floor, they are still required to report all transactions to the exchange, resulting in the actual closed deals on the exchange at 32% of this value. There were 129 trades over the exchange in the period from 4 October 2007 to 3 March From study by Nicholas J. Sitko and T.S. Jayne, the exchange member-brokers conduct only roughly 2-5% of their commodity trades are over the exchange, while the majority of non-members do not use the exchange. When trade over the exchange stopped, there were a number of enquiries from large scale farmers on the prices on the exchange, indicating they use the prices on the exchange but they do not use the exchange to conduct their trade. Marketing of the service By having 12 member traders/brokers on the exchange, it was assumed that these members would conduct their trade business on the exchange yet only a fraction use the exchange for this purpose. This is because: 1) exchange membership gave them access to contracts on the exchange of the World Food Program (WFP), the biggest buyer and generator of trade; and, 2) as revenue from using the exchange is lower than from trade outside the exchange, there is no incentive for traders to use the exchange. Capacity hosting organization The current structure of the exchange is not working. There is a conflict of interest associated with traders acting as brokers while simultaneously being owners. Additionally, the traders/brokers of the exchange conduct only 2-3% of their trade on the exchange. The current structure is being reorganized and the Lusaka Stock Exchange will take up a 51% share in the exchange. Conclusion with regards to quality of the system In its current format, the exchange is not successful and the structure is not working. A conflict of interest is associated with traders acting as brokers while being owners, and only 2-3% of their trade is through the exchange. The exchange does provide valuable market information to all players in the industry. Major issues facing the exchange are: High risk of contract non-compliance 34

35 Potential conflict of interest associated with traders acting as brokers on the exchange Vulnerability of the exchange to market manipulation due to market thinness (low number of actors and low trading volumes) Inability of the exchange to attract financial institutions to commit to the exchange Ad hoc and unpredictable nature of government interventions in the commodity markets affects the trade on the exchange No effective dispute resolution in place There is need for the development of statutory instruments that make trades conducted on the exchange legally binding No ZAMACE certified warehouses There is need for enactment of the agricultural credit act in order to be able to operate the certified warehouses and to issue warehouse receipts Efficacy of the Business Model Business model The business model of the exchange depends entirely on the volume of trade as the exchange charges a fee for every trade conducted. Recently there has been no trade on the exchange as it is restructuring. Revenue and running cost of ZAMACE ZAMACE receives income from the following sources: Monthly membership fee from members, about US$1200 per month A 0.15% transaction fees of the trade value for each side of the trade through ZAMACE A 0.2% on the value of a reported/registered trade Charges for testing commodities and their certification services vary from K56,000 to K112,000 per sample Inspections and certification of storage is +10% Staff training on grain handling and warehouse operation at K 280,000 per participant From inception to March 2011, USAID provided over $1 million in funding Revenue from membership fee: Estimated revenue from the 12 members is around K 5,600,000 per month (about US$1,200) and US$172,800 per year. Revenue from trade: With the ZAMACE fee structure and the figure of $72 million of reported/registered trade over the exchange (actual closed deals on the exchange is 32% of the total reported/registered trade), the total income of the exchange from trade each year is approximately US$42,000: Revenue from trade over the exchange: US$ 72,000,000 * 32% * 0.3% = US$ 69,120 Revenue from reported/registered trade: US$ 72,000,000 * 68% * 0.2% = US$ 97,920 Total revenue from trade over the last three years: US$ 167,040 35

36 Revenue from trade per year is approximately: US$ 42,000 Fees paid by the member-brokers for trading and the reported/registered trade over the exchange can be subtracted from their monthly membership fee. In essence, revenue from the trade and reported/registered trade over the exchange will be lower than the estimated figure above. Due to the low volume of trade, ZAMACE has scaled down its personnel and increased the monthly membership by 25% to cover its running costs. However some exchange interviewed in the study by Nicholas J. Sitko and T.S. Jayne would reconsider whether the membership costs are justifying the benefits they derive from using ZAMACE. Conclusions with regards to efficacy of the business model The business model depends on the volume of trade on the exchange. The exchange does not generate enough revenue for its operational cost in its current format. ZAMACE has been developed and reliant on donor funding (USAID), and unless the current restructuring exercise addresses business model issues/financial sustainability, it will not survive TRANSZAM Introduction TRANSZAM is a web based exchange for transport and was developed by the Zambia National Farmers Union (ZNFU). The platform was launched on 17 July with funding for the development and promotion provided by the EU Analysis of the Quality of the System Name and details service Name: TRANSZAM Launch date: 17 July 2011 Country: Website: Contact details: Zambia Description of the service: Zambia National Farmers Union (ZNFU) Tel Fax ZNFU Head Office Showgrounds Lusaka, Zambia TRANSZAM is a web based exchange for transport. The system was developed by the ZNFU because transport is a main cost factor for the agricultural industry and in short support during certain periods of the year. The system targets transporters and all players in the Zambian agricultural industry however the system is also used by other industries such as mines, traders, cement companies, etc. The system allows customers to post their transport needs on the exchange. A user will first register on the website by providing contact details, address, telephone number, etc. and, once registered, loads can be posted on the website by providing the following information on the goods to be transported: 36

37 From (location of the goods) To (destination) Delivery date Load description Packaging Load weight Comment The posted load is viewable by everyone with access to the website, however only registered transporters are able to see the contact details of the person who posted the loads. Transporters that have registered on the website are all listed with their contact details in a directory also found on the website. Transporters are also able to post empty backloads on the system by providing the following information: From (location of the truck) To (destination) Return date Truck type / Truck size Comment Usage and Impact of the system The system was launched in July 2011; the number of transporters that have registered on the system is 91 and the number of loads posted on the system is 47. The total weight of all the goods posted on the system to be transported is over 308,785 tons, representing about 10,295 truckloads. Of the 47 loads that are posted, the type of loads and their destination/origination are summarized in Table 2. Table 2: TRANSZAM usage Destination/origin Number of postings Type of load Number of postings Zambia 13 Maize/Wheat/Maize seed 20 Tanzania 8 Sugar 3 South Africa 7 Lime 2 Mozambique 5 Molasses 1 DRC 5 Milk 1 Kenya 4 Mining products 5 Botswana 2 Cement 2 Zimbabwe 2 Wood 3 Namibia 1 Steel 2 Other 8 The following information was received from the systems administrator on the feedback given by the users of the transport system: 37

38 Zambia transporters are expensive compared to foreign transporters; users prefer to deal with cheaper, foreign transporters Transporters appreciate the system; it makes it easier to find loads Customers complain that some transporters try to subcontract to other transporters Target group The system targets transporters and all players (traders, farmers, etc.) transporting goods in the agricultural industry in Zambia, and is used by other industries like the mines, traders, cement companies, etc. The ZNFU is exploring an option to expand the system in the region. Cost of the service to the end user Users can post their goods to be transported on the system for free. Transporters will pay a (proposed) subscription fee of US$200 per year and to promote the system, no subscription fee is charged in the first 6 months. Requirements to run TRANSZAM The system software was developed by a local Zambian company and is hosted on a web server in the US (where the ZNFU website is also hosted). There is no need/cost for investments in hardware or internet connections. To operate the system, the ZNFU hired one permanent systems administrator. The administrator s task is to answer/respond to user calls, to collect user feedback, to promote the system and to report back to the ZNFU management responsible for the transport system. Marketing of the service The marketing of the service was conducted in the following ways: Newspaper: adverts in two major national newspapers over a period of 12 weeks (average of 5 adverts/week) Television: 1 minute television spot with a total of 2 television spots in prime time over a period of 4 weeks Radio: daily radio spots on two stations over a period of 12 weeks sent to all agricultural players in the industry Phone calls: phoning potential users of the system Launch event: invited guest from the transport industry, agricultural sector and government representatives It is believed that the highest impact was reached through the newspaper adverts. Capacity of the host organization See section Conclusions with regards to the quality of the system The system is still in the start-up phase and it is difficult to draw firm conclusions at this stage Within a short time a considerable number of transporters have registered on the system The number of loads and backloads to be posted is increasing There is no client feedback with regards to the number of loads and backloads that have actually been transported through the system 38

39 Demand for regional transport information appears to be relatively high Efficacy of the Business Model The EU provided funding for development of the system, consultancy fees and the development of the software. There was also funding provided for promotional activities and the system administrators salary. Summary of the costs are noted in Table 3. Table 3: TRANSZAM costs Description Software development and consultancy fees Costs Euro 24,000/US$33,600 4 month salary for systems administrator Euro 2,000/US$2,800 Promotion on radio, TV and newspapers TOTAL: Euro 16,000/US$22,400 Euro 42,000/US$58,800 The business model of the transport system is based on subscriptions paid by the transporters as users posting loads can do this for free. Based on the design survey, about 300 transporters could subscribe to the system provided there would be enough transport offers. The proposed subscription fee for one year is US$200, with the first 6 months free in order to promote the system. The business model is based mainly a transport system for local transporters within Zambia. From the postings of loads and backloads to date, there is a much larger potential/interest in the system from a regional perspective: the number of posts for goods to be transported in the region is larger than the number of postings of goods to be transported within Zambia. Developing the TRANSZAM with a focus on regional transport development/linkages will give the platform a higher number of potential transporters and will improve the business model/financial viability. Revenue and cost for running TRANSZAM Revenue Currently there is no revenue generated because the system is free for the first 6 months. No information is available to determine if the 91 registered transporters are willing to pay the proposed subscription fee. ZNFU is exploring the option to make the system a regional transport system. Cost for running the system The main costs for running the system are provided in Table 4. Table 4: Running costs of TRANSZAM Description Cost per month Cost per year Salary of the administrator US$600 US$7,200 Communication, mainly phone calls US$500 US$6,000 Total US$1,100 US$13,200 39

40 Additional costs for promotional materials, primarily newspaper adverts, are noted in Table 5. Table 5: TRANSZAM promotional and advertisement cost Description Cost per month Cost per year Newspaper adverts US$2000 US$24,000 Total US$2000 US$24,000 Conclusions with regards to efficacy of the business model It is not possible to draw up firm conclusions as the system has been running for about 3 months and is in the testing/promotion phase Potential for a viable business model (transporters paying subscription fees) are in place Major income is likely to originate from regional transporters who could make the business model viable, but more work will need to be done E-extension (under development) Introduction The ZNFU is currently developing a mobile phone platform for the agricultural sector called E-extension that targets small and medium scale farmers, traders and processors. The system provides a menu based platform on the Airtel network that will work on any phone. The E-extension system can be used to provide price information, send alert messages and give information on events in the agricultural industry such as field days, training activities, etc. Users can also use the system as a trading platform to submit selling/buying offers. The aim of the system is to become the information source for small and medium scale farmers, a communication tool for the industry to communicate with small scale farmers and a main trading platform for the industry. There is currently active interest by MUSIKA (Zambian agribusiness development program from USAID/PROFIT) to develop the system within the country Analysis of the Quality of the System Name and details service Name: Launch date: Country: Website: Contact details: E-extension Still in development Zambia Zambia National Farmers Union (ZNFU) Tel Fax ZNFU Head Office Showgrounds Lusaka, Zambia 40

41 Description of the service: The E-extension system is a menu based platform that can be accessed using any type of cell phone from on the Airtel network. Users can access the system by calling *100# on their phone. The very first time the user uses the platform he is asked to select his province and district from the menu to reach the following information: 1. Messages (5/2) 2. Events (13) 3. Buy or sell products 4. Market prices (84) 5. Company products 6. Your profile Messages This menu works like an inbox providing messages from the systems administrator, companies and organizations using the platform. For example, if there is an outbreak of a disease in an area, the Ministry of Agriculture could use the system to send a message to everyone in that area with a notification of the outbreak. It can also be used to promote new products, announcements, extension information, etc. The message service can: Target farmers in a specific area (district level, province or national) Enable companies to communicate with their contracted farmer/distributors/agents Allow the Ministry of Agriculture and Cooperatives (MACO) or agricultural development programs (conservation farming, etc.) to communicate with their extension staff/ farmers/etc. Events This menu lists all the agricultural events by area in Zambia: Events such as field days, training, meetings, promotions/vaccinations The date/venue of the event, contact details of organizing persons and content of the event Will show events at both camp or block level Buy and sell products This menu allows user to submit buy/sell offers and see all the offers in the system. The user can: Sell his product by indicating the quantity of the commodity (crops, livestock, etc.) and price (optional) See what other users are offering, contact details (mobile phone number) and location (at camp level) Post offers to buy product, commodity, quantity, price and location See which traders are buying what and for what price, including the contact details of the traders Market prices This menu provides the same information as found in the ZNFU 4455 system in section Company products 41

42 This menu provides information on products provided by inputs suppliers and the following: Major input supply companies listed (fertilizer, chemicals, livestock inputs, etc.) Listing of the products for sale, based on main product and sub group Product price, a description and an option to order the product. Once a user has placed an order this information is sent to the company by . The menu item can also be used by companies as an in-house system whereby they link themselves to their agents/distributors for control and sales of their products Usage and Impact of the system The system is still in development. Target group The system targets small and medium scale farmers, traders, processors, out grower companies and input suppliers for the following uses: Farmers Access agricultural information Access agricultural extension services (both Government as well as private sector) Find information on agricultural events Find price information on inputs Find price information from companies buying produce Sell produce Traders and processors Find prices of competitors Find selling offers from farmers and traders with the location, volumes, prices and contact details. Submit buying offers Out grower companies Communicate with their field staff/distributors Communicate with their farmers Input suppliers Provide price information for their products and information on where to buy these products Promote their products Ministry of Agriculture and Livestock Two-way communication with staff (National, Provincials, District and Field staff) Communication with farmers and farmer groups (also coops) Cost of the service to the end user The proposed cost to the end user is about Kw1000 per week (approximately US$0.20). Requirements to run the E-extension system 42

43 The software developed specifically for the system Support from the software development company Hardware in place, including server and routers A hosting agreement for the server with the cell phone company An internet connection for the server to be able to remotely access the server The option of charging the user for using the platform. This needs to be in place with cell phone company, is currently under development and expected to be in place within two months A revenue sharing agreement with the cell phone company A fulltime systems administrator for managing the platform Marketing of the service The marketing of the platform will be a major factor in the success of the platform and users need to be educated on how to use the system. From a similar cell phone banking platform experience, users must be shown how to use the platform in order for them to use it. The marketing will be done by: Promotion activities in collaboration with Airtel: this will be the major manner of promotion and will come from Airtel s regular promotion budget to include radio, television, newspaper, etc. Prize giveaways when users use the system Promotion within ZNFU structures Promotion through GRZ extension structures (optional) Training programs (ZNFU, Conservation Farming Unit, GRZ, etc.) Conclusions with regards to the quality of the system The system has the potential to provide a wide range of tangible information (and trading) which could lead to major increases and efficiencies in the agriculture sector The system is still being developed and the quality/usefulness is yet to be determined Capacity of the host organization See section Efficacy of the Business Model The platform is based on user fees and charging companies for use as a marketing tool. The user fees are charged by deducting talk time from the user account, similar to how a SMS message is charged. The proposed charging mechanism will be based on using the system for a period of one week for a maximum of 25 times. After 25 times or after one week, the user will be charged again for using the system. The revenue will be shared between the cell phone company and the ZNFU; the cell phone company will pay the ZNFU every month their share of the revenue. Companies are charged for sending out commercial messages. The system is able to track the number of times a message has been read and the company will be charged based on the number of times a message is read. The strength of the system is that the system builds a user profile for every user of the system which is based on location, how often he uses the system, the type of products he 43

44 offered to sell/buy, etc. This enables companies to use the platform as a direct marketing tool for their target group so, for example, a feedmill company can directly approach all registered poultry producers in a certain province. Potential revenue from the system The potential revenue from the system is based on the number of cell phone users in the agricultural areas in Zambia, primarily from the Southern, Eastern and Central province. The total number of Airtel customers in these provinces is over 1 million. The system targets to have 10% of these customers using the system at least twice a month, bringing the total number of users to around 100,000. The system will charge the user Kw1000 per week with the revenue shared between the ZNFU and Airtel. There is no agreement between the ZNFU and Airtel on revenue sharing therefore an estimate of 50% is used. The estimated revenue is provided below in Table 6. Potential revenue from the system as a marketing tool for companies is not included as no information is available on fees or fee structures. Table 6: E-extension revenue Number of user Fee per week Monthly revenue (usage twice a month) Monthly revenue ZNFU is 50% Yearly revenue ZNFU 100,000 US$ 0.20 US$ 40,000 US$ 20,000 US$ 240,000 Cost for running the system Running costs are similar to the ZNFU 4455 system but communication costs will be higher as more companies and organizations will use the platform. It is estimated that the running of the E-extension system could be around US$ 26,000 per year. Promotional costs Launching the system Promotion on television, radio and newspapers, estimated at US$20,000/week (paid from Airtel budget) Training programs, US$ 20,000/district Raffle programs (could be financed through sponsorships) Conclusions with regards to efficacy of the business model Potential for a viable business model are in place (airtime, payment for business information, subscriptions by major companies/grz, etc.) The system is still in the development phase and will need to be properly piloted (also experimenting the business model opportunities) based on which national roll out/up-scaling could commence 2.3. Malawi Initiatives There are currently 4 price and market information sources in Malawi: Agricultural Commodity Exchange for Africa (ACE) ESOKO initiated by the MLI Malawi Agricultural Commodity Exchange with the Initiative for Development and Equity in African Agriculture (MACE/IDEAA) 44

45 Market information collected by the Ministry of Agriculture ACE and ESOKO are discussed in detail below, but MACE/IDEAA and the Ministry of Agriculture information will not be included as the information is of limited use to the industry. MACE/IDEAA has ended and is struggling with funding, while the Ministry of Agriculture information collected by 300 enumerators focuses on farmer gate and retail prices for a large range of agricultural products. The information is provided to the planning department and is not available to farmers or traders ACE Introduction The Agricultural Commodity Exchange for Africa (ACE) was established in Its initial design was similar to that of the exchanges in Zambia, Kenya, Uganda, and Ethiopia. Startup funding was provided by USAID and the Common Fund for Commodities, Hewlett Foundation, Michigan University, DFID, COMPETE, AGRA and MLI have also contributed to funding the exchange. Volumes traded have been relatively low, but increased in 2011as the World Food Program (WFP) began using the exchange and sending out market information/trade opportunities by SMS using the ESOKO platform. The operation and volumes traded over the exchange are well documented with issues reported in a study completed by Pieter Robbins and noted in meetings with the principal adviser of ACE, Kristian Schach Moller Analysis of the Quality of the System Name and details service Name: Launch date: 2004 Country: Website: Contact details: Agricultural Commodity Exchange for Africa (ACE) Malawi Description of the service: and Agricultural Commodity Exchange for Africa (ACE) 28/251 Kanengo Light Industrial, Lilongwe, Malawi Tel: /304 / Fax: [email protected] The exchange is a trading platform available on the internet and, during the trading session, at the ACE office. The model of the exchange is based on a pyramidal structure with a commodity exchange on top and warehouses with a warehouse receipt system are linked to the exchange. The warehouse receipt system has the following structure: Large warehouses certified by the exchange Commodities in the certified warehouses tested to see if they comply with the exchanges quality standards 45

46 Warehouse receipts issued for the inspected commodities and used by producers or traders as collateral to borrow money from banks. The commodities in the warehouses are traded on the exchange The original method of trading was to place a buy/sell offer whereby the buyer/seller agrees with an ACE registered broker on any terms, volume, quality and price. The broker places the bid/offer on the trading system (accessible on the internet trading system). When a bid or offer is on the system, anyone can accept it through a registered broker and a contract is automatically generated. The low volumes of trade over the exchange can be contributed to: Lack of the availability of certified warehouses Mainly available to larger traders, not attracting smaller traders/farmers who are primary producers Larger traders and processors did not use the platform Access to information is only available on the internet Recently the exchange introduced two additional ways of trading on the exchange: the Bid Volume Only (BVO) and Offer Volume Only (OVO). Bid Volume Only (BVO) is done by: A buyer bids to buy a commodity with specified terms and volume, but without a specified price. Potential suppliers can offer to sell on the BVO system. Offers can be placed online or at the physical trading sessions hosted by ACE. Suppliers compete on price, as all other terms are pre-determined by the buyer. Suppliers can offer any volume. When the BVO ends, the buyer will award contracts to the offers with the lowest price until the desired volume is bought. The buyer is free to select any or no offer. Offer Volume only (OVO) is done by: A seller offers to sell a commodity with specified terms and volume, but without a specified price. Potential buyers can bid to buy on the OVO system; bids are placed online or at the physical trading session hosted at ACE. Buyers compete on price, as all other terms are pre-determined by the seller. Buyers can bid any volume. When the OVO ends the seller will award contracts to the offers with the highest price until the desired volume is sold. The seller is free to select any or no bid. Exchange trade has recently increased from 20,000 MT in 2010 to 30,000 MT in July The breakdown of the trade in 2011 is noted in Table 7. Table 7: ACE trade up to July 2011 Normal trade over the exchange (MT) Trade from BVO (MT) Trade from ESOKO (MT) WFP (MT) Total (MT) 4, ,477 24,972 32,217 The increase of trade can be attributed to the following: 46

47 Support from the WFP whereby part of its bulk procurements and a significant part of its smallholder purchases are done through the exchanges. A recently established WFP program called Purchase for Progress, or P4P, is viewed as a fast-track approach to linking smallholders with modern markets. Introduction of certified warehouses using the warehouse receipt system. The first commercial silos in Lilongwe have issued the first warehouse receipts. A further 4 rural sites are refurbished in order for them to issue warehouse receipts. Information on trade opportunities are sent by SMS messages using the ESOKO platform. The exchange is trying to increase trade by: Continuing to set up warehouses with the Grain Traders and Processors Association Including more users on the ESOKO platform Setting up 20 call centers to handle the inquiries from the ESOKO SMS messages The targets set for the end of 2012 are to: Have 20,000 small operators profiled and included in the ACE ESOKO platform, receiving regular market information and trade updates. Generate 70,000 MT of trade from the ESOKO platform. Have 20 call centers in 10 rural districts, each facilitating 5000MT of trade for a total of 100,000MT. The first call center is to be established in November to address up to 200 calls per message. Have total trade on ACE reach 170,000MT Issue 3000MT of rural warehouse receipts and 7000MT of urban issued warehouse receipts Finance warehouse receipts of US$ 900,000 Capacity of the host organization ACE was established as a USAID project, still operates on this basis and is dependent for a large part of its expenditure on donor funding. ACE management (supported by a development agency) is highly committed to the success of the organization and is developing different approaches to make ACE work. For long term success, ACE needs to be anchored into a registered Malawian organization, such as the grain traders association or farmers association. The information collected The information collected are the offers on the exchange which are listed on the exchange, available on the internet and distributed using the ESOKO platform. The value of the exchange as a source of market information depends on the number of trades and the number of people receiving information using the SMS messages. Collection method The offers are done over the exchange. The target group Large traders Medium traders Processors Farmer groups 47

48 Usage of the data With the introduction of the ESOKO platform, the exchange has significantly increased the number of users that receive information via SMS message with trade opportunities of the exchange. The total number of users registered with ACE on the ESOKO platform is 500; the target for the end of 2012 is 20,000. To summarize, the system can be used for: Trading: Contacting suppliers: Buying: Selling: Planning: Statistics: Actionable data: Dissemination of the data yes No Yes Yes Yes Yes Yes, it will enable a buyers and sellers to transact over the exchange Data is available on the ACE website and trade opportunities are sent by SMS message using the ESOKO platform to about 500 registered users. The information on the website is accessed by the larger traders and processors. The information over the ESOKO platform is sent mainly to smaller traders, farmers and farmer groups. An example of the information send by ACE using the ESOKO platform is: ACE is informing you that there is a market for groundnuts at K 155/Kg to be delivered in Lilongwe. Contact Edna on for more information. In order to act on the information in the message, users have to contact the exchange using the cell phone number provided in the message. This has led to a high number of users phoning the exchange, and to handle the large call volume of inquiries, call centers will be set up in the districts with ESOKO 2. Cost of the service for the end user The information of exchange is available at no cost on the ACE website. For trades on the exchange, 0.2% of the value of the contract is charged. Requirements to run ACE The main requirements for an exchange to work are that the exchange should: Guarantee successful transaction Guarantee physical stock Guarantee available funds In order to achieve this, the following is required: Certified warehouses Legislation, enactment of the agricultural credit act in order to be able to operate the certified warehouses and to issue warehouse receipts 2 One of the weaknesses of the current communication structure is that communication is dependent on a third party, the ESOKO platform. If ESOKO stops operating, the exchange would lose its communication tool. 48

49 Uniform system of grading Quality control of the stocks Agreed upon standards Minimal to no government intervention in the market or predictable government interventions Support from the financial sector Usage and Impact of the system The usage of the system has been limited as it does not cater to small scale farmers and traders. In 2011, with the commitment of WFP, NASFAM and Farmers World, activities on the exchange have improved, which can also be contributed to the use of the ESOKO. However there are a number of issues that must be resolved: High reliance on WFP trade: in 2011 WFP generated 77% of the trade Defaults on contract due to none delivery or commodities not being of the required specifications Limited number of certified warehouses available in the country OVOs and BVOs which are placed on the system do not commit the buyers/sellers to actually buy/sell, creating uncertainty Marketing of the service Marketing of the system is an important aspect and is becoming more important now that more players are targeted through the ESOKO platform. There is also need to education and train users in the warehouse receipt system. The Ministry of Agriculture and Food Security has expressed interest in linking the Extension Development Officers and the District Marketing Officers to the ACE activities and warehouse receipts. Conclusions with regard to the quality of the system The exchange attracts only a few players and there is very little trade conducted, thus revealing the exchange is not very successful. However the exchange also plays a role in discovering how it can work in a country with mainly small holder farmers, large number of small scale traders and few large scale traders. This requires a long term approach which allows for experimentation and lessons learned Efficacy of the Business Model Business model The exchange has received donor support for setup, training, IT development, etc., as noted in Table 8. Table 8: ACE donor support Year Donor Amount Project 2005 USAID US$ 400,000 Ace start up 2006 Common fund for commodities US$ 120,000 Regional sensitization 49

50 2007 Hewlett foundation US$ 80,000 Core running cost 2007 Michigan University US$ 40,000 Technical assistance 2008 DFID US$ 35,000 Bridge funding 2010 COMPETE US$ 60,000 Phase 1 current project AGRA US$ 210,000 Market linkage COMPETE US$ 95,000 Core funding -Training/capacity building -Trade facilitation and Operational funding -IT/ software development -Technical assistance CFC US$ 600,000 Ware house receipt -Warehouse refurbishment 2011 MLI US$ 47,200 Trade facilitation -Warehouse receipt infrastructure -ESOKO/SMS -Grain bulking centers linkages and awareness The business model of the exchange depends entirely on the volume of trade and charges a fee of 0.2% for every trade conducted. In order for the exchange to cover its running costs of about US$ 160,000 per year, it needs to have a trade volume of about 400,000 MT. Based on 2011 trade volumes of 30,000 MT, the exchange will continue to require funding to operate. The exchange does not generate sufficient volume and revenue to support its operation. The current volume of 30,000 MT, with a value of US$ 9 million could generate about US$18,400 in revenue. For 2012, the exchange has set new targets for its trade volumes to analyze its business model: Have 20,000 small operators profiled and included in the ACE ESOKO platform, receiving regular market information and trade updates Generate from the ESOKO platform 70,000 MT of trade Have 20 call centers in 10 rural districts, each facilitation 5000 MT of trade, a total of 100,000MT Total trade on ACE to reach 170,000 MT 3000MT of rural issued warehouse receipts and 7000 MT of urban issued warehouse receipts Warehouse receipts financed of US$ 900,000 Revenue and running cost of ACE The projected ACE revenue and running costs for 2012 is presented below in table 9. Table 9: ACE revenue and running costs for

51 Revenue Trade volume Est. value per ton based on the current value traded Total value traded Fee charged. Total fee 170,000 MT US$ 280,- US$ 47,600, % US$ 95,200 Running costs Total running costs (current) US$ 160,000 Expected deficit US$ 64,800 Of the total traded volumes (100,000 MT) should be generated by the call centers. These centers could then cover their running cost by increasing trade in their area and facilitating transport, sale of bags, etc. The current running cost of the ACE office is estimated to be about US$ 160,000 per year. Additional costs are from running the proposed call centers, the subscription to the ESOKO platform, the communication cost of the ESOKO platform, promotional cost, training, etc.: Call centers: the target for the number of call centers is 20 and the running costs are estimated to be about US$ 500 per call center per month. The total cost for the centers would be US$ 120,000 per year ESOKO subscription: the subscription fees for ESOKO are not yet defined but is estimated around US$ 8000 per year ESOKO communication: the communication cost of sending SMS alerts through the ESOKO platform is US$ 0.05 per SMS message. The target of ACE is to have 20,000 people registered on the platform and if ACE would send one SMS alert per week to each subscriber, the total communication cost would be: US$ 50,000 Summary of the total running cost of the ACE platform estimated from the targets set by ACE for the end of 2012 are provided below in table 10. Table 10: Estimated total ACE income and running costs Running cost ACE office Running cost 20 call centers Subscription ESOKO Communication cost ESOKO, for subscribers and 1 SMS alert per week Total costs US$ 160,000 US$120,000 US$ 8,000 US$ 50,000 US$ 338,000 Conclusions with regards to efficacy of the business model ACE, in its current operation, is not able to become financially viable and will need to continue to rely on donor funding to operate To increase trade and income for the exchange, ACE aims to increase the usage of the ESOKO platform to reach more traders and farmers is unviable as the running costs of the additional services outweigh the expected incomes (i.e. the projected extra cost for the 20 call centers is US$120,000, while the projected total trade of the exchange is US$95,200) ACE is operating as a project, relying for large parts of its current expenditures on donor funding, and will require institutional anchoring for long term survival 51

52 ESOKO Introduction ESOKO was developed in 2006 and has evolved from a donor or NGO-financed project based system to an independent commercial standalone system. The platform provides information on who has what to sell and where, and is developed for the internet and mobile phones using SMS messages. ESOKO registers members that have requested to receive SMS alerts of commodity market prices and offers to buy/sell. It also provides a platform to push SMS messages to registered members. ESOKO continues to further develop the platform with new tools. The platform is currently used in the following countries: Ghana, Benin, Burkina Faso, Cameroon, Ivory Coast, Madagascar, Malawi, Mali, Togo, Nigeria and Sudan. In Malawi, the system was introduced by the USAID MLI project. In order to run the ESOKO platform, a fee payable to ESOKO is required for set up and for an annual license fee. Companies, organizations or individuals who want to make use of the platform must subscribe in order to use it and receive the information. The MLI project introduced the platform in Malawi as part of their program and has been running it for over a year. MLI paid for the installation and license cost. To date, 11 companies and organizations have subscribed to the platform however the MLI project has paid all the subscription fees and communication costs for these companies. Recently two donor-funded projects have joined and paid their own subscription fee. At the end of 2011, MLI will hand the platform over to Wellspring and provide some financial support. Wellspring plans to run the platform in Malawi as a commercial enterprise and will further develop the business model Analysis of the Quality of the System Name and details service Name: ESOKO Launch date: 2006 Country: Website: Based in Ghana; active in Benin, Burkina Faso, Cameroon, Ivory Coast, Madagascar, Malawi, Mali, Togo, Sudan, Nigeria Company selected for running the platform in Malawi: Name: Wellspring Contact person: Michael Shaw Website: Contact details: [email protected]; [email protected] Office: +265 (0) Mobile: +265 (0) Description of the service: 52

53 ESOKO is a mobile phone and web-based integrated platform. It features mobile alerts with market information, push SMS and allows subscribers to send bulk SMS messages to selected user groups. Under the ESOKO platform, individual users, organizations or companies can register/subscribe to the system. A registered user will be recorded with his cell phone number and the commodities he is producing, trading or is interested in. Price information alerts on the commodities for which the user is registered will be sent twice a week and other offers will be sent via SMS. The price information available for 13 markets is collected by an enumerator and submitted using a java enabled phone. An example of a price alert which provides information on the wholesale price of white maize in 5 markets is: Maize (white,grain) (MWK/KG,HWS), Jend = 24 KASU = 20 LIMB = 35 LIZU = 25 MITI =26 The platform allows registered users to submit their own buying/selling offers. These offers can be submitted to the platform by SMS message or by the web interface, and the platform will send these offers to subscribed users. Currently, price offers are only submitted by the enumerators. An organization or company can use the system by first registering their own users. These registered users are then recorded in the system with their mobile phone numbers and are grouped, for example by the commodity they deal in. This enables the organization or company to send bulk SMS message to their registered users (based on the group they belong to) and provide them with information. On the Malawi ESOKO platform there are currently 11 companies and organizations subscribed to the platform: ACE (Commodity exchange) Dalitso (Trader) UZ investments (Trader) Farmers world (Trader) Muli Brothers (Trader) Cheka (Farmers corporative with links to world vision) KASFA (Branch of NASFAM in Karonga, dealing in rice) Mwandama (UNDP project) Chitosa (Trader) MC agronomy (Trader) ZWII (Trader) For organizations or companies using the platform, it was found that they use the platform to send offers and to indicate to users they want to buy or sell products. An example of the bulk message tool is whereby ACE sends to a notice that there is a trade opportunity to sell a product on the exchange, and user are now aware of this trade opportunity. The total number of users registered in the system is about 4000 with around 23,310 messages being set per the following categories: 13,000 price alerts 6,284 offer alerts 4,800 push messages from organizations and farmers. 64 request messages 53

54 Rachel Sibande of MLI indicated that they are still in contact with the developers at ESOKO to fine tune the system. One of the issues noted was that the information in the SMS alert was difficult to understand and that it would be better to make the information more descriptive. The information collected Enumerators collect information on whole sale prices in 13 key markets in Malawi for beans (5 varieties), cowpeas, maize, groundnuts, pigeon peas, rice and soy beans. They also collect offers from traders which are submitted to the system. Collection method Enumerators collect prices in the market through visits to various traders. The information is uploaded into the system through java enabled phones. The target group The target group of the ESOKO platform are: Traders Researcher Small Business Exporters NGO s Farmer group Business Consumer Brand Co. Government Subscribers define their own target group when registering. Usage of the data To find out how data is used, users who submitted offers within a two week period were contacted and three organizations were interviewed: ACE, Dalitso and MC agronomy. From the 17 users contacted, 4 did not answer the call, 2 were wrong numbers, 4 spoke Chichewa, and of the 7 interviewed, the following was noted: All of them were traders They indicated the system helped them with trade They now know those areas with low prices and could go there to buy produce They rely on enumerators to upload their offers because it is too complicated to do individually From the three companies interviewed, they all use the platform to: Buy produce where prices are low Contact their registered users Compare prices of the competition There is no other data available on how individual users use the platform. Dissemination of the data Dissemination of data is done through SMS text messaging where users can also use the internet (although very few have access to the internet). Cost of the service for the end user Currently MLI is paying for all the users but when Wellspring takes over, the cost structure is expected to be similar to ESOKO in Ghana, as noted in Table 11. Table 11: Costs structure for ESKO users 54

55 Subscription Price (per year) Service Target group Bronze US$ SMS alerts/week Trader, Researcher Silver US$ 250 SMS alerts and Website Max 200 members Small Business, Exporter Gold US$ 1,500 All tools, Max 2000 members Farmer group, Business, Small NGO Platinum US$ 8,000 All tools, Unlimited Large Business/Assoc, NGO s Consumer Brand Co., Government When subscribers to the ESOKO platform sent SMS alerts to their registered user they will have to pay for the communication cost. The cost for sending one SMS message through the system is (according to ESOKO Networks) US$0.05 per message. So if a company has registered 1000 users/members and wants to send them an alert, this would cost around US$ 50. Currently there is no cost for the end receiver of the information as users are registered through a company or organization that covers the subscription fee. Usage and Impact of the system The system has been running for about a year and no impact or evaluation study has been conducted. Usage to date is: Impact 12 companies are using the platform 4000 users are registered by the companies subscribing to the system The observations on the impact of the system in Malawi is based on the interviews with the companies/organizations contacted and the individuals that were posting their offers on the system. Dalitso: has registered 1000 farmers; their target is to register a total of Their experience with the system is that it does work for them to: - Buy produce from the farmers registered by sending offers - Look at the prices of other traders It was not possible to get an indication of the increase in volumes traded for Dalitso derived from the use of ESOKO as this was not recorded. Dalitso was not aware that they eventually will have to pay to use the platform however they indicated that this would not be a problem. MC agronomy: has registered 400 farmers. They indicated the system works well for them to: - Compare prices with their competition - Buy produce in areas where the prices are low It was not possible to get an indication of the increase in volumes traded as this was not recorded. MC agronomy was not aware that they eventually will have to pay for using ESOKO and noted that the charges of about US$150 would be fine as they are only using the system for 4 to 6 months a year. 55

56 ACE: has registered 500 users; their target is to register a total of 20,000. They indicated that the system works well for them and have experienced an increase in activity recently due to the use of ESOKO and the introduction of BVO and OVO contracts. In order to act on the information provided by the exchange (the ESOKO SMS messages), users have to contact the exchange using the cell phone number provided in the message. They do this by sending and SMS message or phone the provided number. This has led to a high number of users phoning the exchange for which it was not prepared. In order to deal with this high number of inquiries it wants to setup call centers out in the districts with ESOKO. Requirements to run the system There are no hardware or software requirements as it is already implemented and can be accessed through the internet 3. For the enumerators collecting prices, there is a need for a Java enabled phone to upload the collected price information into the system. Personnel requirements are enumerators to collect prices once a week and a systems administrator to communicate with ESOKO and subscribed users. Marketing of the service The service is currently run by the MLI and will be handed over to Wellspring at the end of It is not known how the transition will take place. Capacity hosting organization Currently the service is run by the project MLI and Wellspring acquired the franchise to run the ESOKO platform in Malawi at the end of Wellspring is in the process of taking over the running of the service, for the first 6 month they will receive support from MLI who will pay for the enumerators to collect market prices. Wellspring was contracted by MLI to conduct a study on the implementation of a market information system in Malawi and was/is also involved in the training of the users of the ESOKO platform. Wellspring was also involved in the setup and implementation of the platform, and has a strong knowledge of the Malawi market. However they still have to take over the operations of the service from MLI and transform it from a free service into a commercial service supported by user fees. Conclusion with regards to quality of the system The ESOKO platform is a useful market information and communication platform for companies that want to reach customers. The success of the system in reaching a larger part of the farmers will depend on the number of companies and organizations that subscribe to the platform and the number of users they will register. There is currently no evidence that the system will be taken up by individual farmers or if it is cost effective to do so. The system is designed in a way that organizations or companies that want to use the platform can do so over the internet, without the requirement of servers or software. However to run the system there is need to involve enumerators for the collection of 3 A disadvantage of this setup is that the franchisee has no control over the system other than the tools provided to him by ESOKO Networks. 56

57 market prices; this is one of the requirements from ESOKO Networks to operate the platform Efficacy of the Business Model There are two business models: one for ESOKO Networks and one for the franchise running the platform in the country. The business model of ESOKO Networks is based on: Franchisees use the platform and pay an annual subscription fee as part of the subscriber income Training and consultancy services for the deployment of the platform Franchise running the platform on a country basis: Is provided with access to the platform and support by ESOKO. The local franchise pays an annual license fee of US$ 15,000 to ESOKO Networks and there is also an agreement on the revenue sharing from the system. There are minimum requirements set by ESOKO to the franchise, one of them is the collection of price information by the enumerators. The franchise is expected to make revenue from: Subscription fees of the companies and organizations making use of the system (currently 11 companies and organizations) Providing follow up trainings for the customers, etc. of the subscribers (often donor funded) Training and consultancy services The training and consultancy services provided by ESOKO are another source of revenue. In Malawi for example, ESOKO Networks was contracted by MLI to setup the platform and provide training for the users. The specific amounts charged in Malawi for these activities were not provided but are estimated to be less than US$100,000. For this they acquired a subscription/license from ESOKO Networks, they paid for all the subscription/licenses for the companies using the platform and paid for the training of the users and the communication cost. Customer base ESOKO Networks has implemented the platform in the following countries: Ghana, Benin, Burkina Faso, Cameroon, Ivory Coast, Madagascar, Malawi, Mali, Togo and Sudan. The system was recently launched in Nigeria and Mozambique, and new countries targeted are Zimbabwe, Burundi and Ivory Coast. The main customers for ESOKO are NGO s and donor-funded projects. This is because there is a large demand from the donor community for the development of market information systems. Examples for the uptake of the platform from the private sector are found in Nigeria and Mozambique where it was reported the system was taken up by private companies in the startup phase. Business model for the ESOKO franchise in Malawi 4 If the price information collected by the enumerators and send to users registered on the system would be excluded from the platform the service would be limited to a communication tool for companies that have registered their own users in the system. This functionality would be similar to a platform like frontline SMS, a free software tool to communicate with groups of people using SMS messages. 57

58 By the end of 2011, Wellspring will have the franchise for the ESOKO platform in Malawi, including an ESOKO deployment license for the operation of the ESOKO platform. The fee for the license is US$15,000 per annum and they acquired the license for one year. There is an agreement with ESOKO Networks on revenue sharing from the system, where fees charged and other income derived from the ESOKO platform, will be shared by ESOKO and Wellspring. Wellspring has not started operating ESOKO yet so there is no data available on how the ESOKO platform will perform when operated as a business. As MLI is paying for all the users of the platform, there is no information available on how much users are willing to pay for the service. From interviews with Wellspring and MLI, it is clear that the development of the ESOKO platform as a viable business is still an ongoing process and no simple formula can be applied. It will be a challenge to create enough revenue from the ESOKO platform, particularly as the current economic climate in Malawi is not positive. Donor support to Malawi has reduced and prices for tobacco, the main export earner, are low. The country faces a shortage of foreign currency and there is a lack of fuel. Within this economic climate which is seriously affecting the agricultural sector it will be difficult to run a commercial viable market information system. Revenue from the ESOKO platform in Malawi The ESOKO platform does not generate any revenue except for the two organizations that paid for their subscription. The following are options for creating revenue from the system: Fees charged from the companies and organizations currently using the platform. Under the MLI project there were a number of grain-bulking centers upgraded, and the operators of the centers are using the ESOKO platform to contact farmers and traders. This is a great help to the centers in terms of increased access to produce, increased volumes of trade and a reduction in marketing and communication costs. Subscribers have indicated they were willing to pay 50% of their savings towards the platform but disagreed that they should pay for the increase in business as this could not be measured. The estimated amount they were willing to pay was about US$2000 per year. This would cover the cost of a gold subscription of US$1,500 per year. Individual user fees. To have individual users (ESOKO bronze membership, US$25 a year), subscribing to the services is another stream of revenue. This is not easy; users indicated that they could use the system and share the information with a group of people. This will increase the impact of the system, but does not increase revenue, and collection costs are also expected to be high. (ESOKO Networks replied on the viability of collecting small subscription fees from large number of users that this is an issue and would probably only be able to be solved by the use of a mobile payments system. The first developments of mobile banking are taking place in Malawi, for example Airtel is piloting the first a mobile banking project based on the success of the M-PESA mobile banking platform in Kenya. It can be expected that it will take a few years before this will be adopted on a larger scale.) Income from financial institutes. Wellspring indicated that financial institutions can also use the platform as a source of market information, for example to provide loans to farmer. Banks could provide farmers who receive loans with a subscription 58

59 to improve their marketing. At the same time, financial institutions should be persuaded to pay for this market information annual for a fee of around US$ 5,000. However this still has to be explored. Consultancy services and training. Another potential revenue stream from the platform is consultancies and training required by NGO s, donor organizations and companies. There is a need from this sector when engaging in the use of the platform for both of these services. Marketing tool for companies. The platform has the potential to be used as a marketing tool for companies. Users in the system can be targeted by companies and organizations directly. The following are options for creating revenue from the system: Value of the content o Income from subscriptions whereby farmers receive SMS text messages with price alerts. The charges for the price alerts would be US$ 3 for three months o Sell the market information acquired from the platform to financial institutions and other parties Supply chain management tools o Subscription fees from companies and organizations that use the platform to send out bulk SMS messages to their registered users in order to purchase commodities. There are two organizations that have paid for their subscription: the USAID Land O Lakes project and ACE. Revenue from individual users that will receive price alerts will be a challenge as there is no evidence yet that individual users are willing to pay for the price alerts. Also there is the cost of paying the price collectors, estimated to be about US$ 30,000 per year. If there is no uptake by individual subscribers to pay for and receive the price alerts, this could mean that the collection of prices will be dropped from the system or that there will be a different method of collecting prices. In this case, the ESOKO platform would be used by organizations and companies as a marketing tool. However MLI will provide bridge funding for another 6 months to pay for the price collectors 5. When asked if the ESOKO platform could be profitable in Malawi, Wellspring said that this could be possible, but it would take at least 2 years before this could be achieved. Cost for running the ESOKO platform. The fee for the ESOKO license is US$15,000 per annum. One of the main costs of running the service is paying for the enumerators, about US$30,000 per year. There is no information available on the cost for the system administrator, office, communication or promotion of the system. Conclusions with regards to efficacy of the business model Wellspring is still in the process of developing and exploring the business opportunities for the ESOKO platform in Malawi. There are a number of 5 ESOKO Networks explained that one of the requirements for the franchise is that they do the price collection. 59

60 opportunities for the platform to create revenue, however it is still necessary to see if they will actually generate enough revenue to run the platform profitable. If the current subscribers (a total of 12) of the platform would pay for the subscriptions and users would require a gold subscription (US$ 1500 per year), the system would generate an income of US$ 18,000 per year. If the revenue from subscriptions would be the main source of revenue, this would require a substantial increase in the number of subscribers to the system. There is a large element of donor participation compared to private sector participation. The users of the system are mainly donor funded, with the advantage that these users are more likely to buy into the system and will pay for additional services like training and consultancy services South African Initiatives Introduction The following companies and organizations were visited in South Africa to identify what sources of information are available to the agricultural industry and to see what business models are used: AGRI SA Commercial Farmers Union of South Africa (Agri SA) Afgri, an agricultural trading company SENWES, an agricultural service and trading company Southern African Confederation of Agricultural Unions (SACAU) AMT, market information and research company SAFEX, the South African commodity exchange AGRI SA and its commodity organization members are mainly involved in advocacy and not into providing market information. Information is provided in the agricultural industry through: AFGRI Commodity organizations providing information to their members Commodity organizations have a database with producers and send a SMS message at the end of each day with closing prices Traders send SMS information to their clients Most farmers use their phone as a communication tool, which is more popular than the internet AFGRI is an agricultural trading service company active in the following sectors: Mechanization services (John Deere dealership) Agricultural input supplies Grain management (storage capacity of 4.3 million tonnes) Feed production Poultry (day old chicks, abattoirs, etc.) Vegetable oil processing Lab equipment Agricultural financing services Brokering and trading 60

61 Insurance In the provision of agricultural price and market information, they provide SAFEX prices to their clients through the mobile phone using an application. This application is installed on the user s phone and will receive daily SAFEX price updates. This service is free for their clients. They have also offices in Zambia (since 2002) which focus on: SENWES John Deer dealership Trading in agricultural commodities (maize, wheat and soy beans) Input financing of farmers (they hold a banking license to operate in Zambia) SENWES is an agricultural service company active in the following sectors: Grain input supply Grain marketing services Agricultural value added services (insurance, financing, etc.) In the provision of agricultural price and market information, they provide SAFEX prices to their clients through the mobile phone using an application. This application is installed on the user s phone and will receive daily SAFEX price updates. This service is free for their clients. They have established offices in Malawi and Mozambique, and are in the process of setting up offices in Zambia. They see business opportunities in the region, especially in the trade of grains, but the situation in each country requires a business model adapted to the local situation. SACAU SACAU focuses primarily on advocacy and capacity building of national farmers unions. They do not have any activities in the agricultural price and market information area, and will need to investigate the needs of their members and explore what role SACAU can play in the provision of this information AMT (AGINFO) Introduction AMT is a private owned company that specializes in the provision of market information and market research in the agricultural sector. Customers for the market information reports and research are government institutes, financial institutes, trading houses, insurance companies, media houses and producer organizations Analysis of the Quality of the System Name and details service/company Name: Country: Website: Contact details: AGINFO (trading as AMT) South Africa Suite 423 Vleissentraal Building, 318 The Hillside, Lynnwood, Pretoria, 0002 PO Box 35368, Menlo Park,

62 / Description of the service/company: AMT is a private owned company that specializes in the provision of market information and market research in the agricultural sector. Their vision is to be an internationally recognized center of excellence in agricultural research and advise, and in providing objective, timely and accurate agricultural market information to the benefit and prosperity of producers, agribusinesses and policy makers. AMT aims to be a one-stop-shop for agricultural market information by providing information for companies, organizations and institutes to make informed decisions. Users can access a large range of market reports on various sectors and commodities by subscribing to weekly, monthly or yearly reports. AMT also provides research and consultancy services. The information collected The information collected is on the following commodities and sector within the agricultural industry: - Maize, wheat, soybean and Sunflower - Livestock: beef, mutton, pork, poultry, ostrich and dairy - Oilseeds - Fiber: wool and mohair - Vegetables: carrots, cabbage, onions, tomatoes, potatoes - Sugar - Feedlots - Wine - Fruits: citrus fruit, deciduous fruit and subtropical fruit - Agricultural economy and trade agreements The information provided by AMT is very diverse. For example, the following information is listed in the weekly wheat reports: - Prices from SAFEX and Chicago Board of trade - SA crop production estimates - Exchange rates - World supply and demand - SA supply / demand / consumption and stock levels - Import parity prices - General economic indicators Although AMT claims to provide regional agricultural data, this is limited to information on direct trade between South Africa and countries in the region. There is no information in the reports provided on market information and trends in the countries in the region. Collection method The information is collected from various sources, including SAFEX, Chicago Board of Trade, statistical offices in various countries of the world, Bloomberg, Reuters, Standard Bank, Grain SA, South African Grain Information Service (SAGIS), etc. The target group 62

63 The target group is anyone interested in the South African agricultural industry. The customer base of AMT currently comprises: - National Department of Agriculture (NDA) and several Provincial Departments of Agriculture - National Treasury - Industrial Development Corporation (IDC) - Commercial banks (e.g. ABSA, FNB, Nedcor, Investec Securities, Standard Bank) - Auditing firms (e.g. PriceWaterCoopers) - Grain traders (e.g. Farmwise, Louis Dreyfus) - Industry organizations (e.g. Cape Wools, SAMIC, SAGIS) - Producer organizations: (Red Meat Producers Organization, Dry Beans Organization, etc) - Co-operatives (GWK, Senwes, VKB, OVK, MGK) - Various agribusinesses (AFGRI, Molatek, Foodcorp,Shoprite, Monsanto, Syngenta, Pfizer, Bokomo, Bayer,Starke Ayres, Pannar Saad, Teraso, Voermol, Yum International, Continental Oil Mills, Early Bird Farms, Envirogrow, I and J) - Media (Landbouweekblad, Farmers Weekly, AgriTV) - International organizations/ companies (MLA, Meatco, Meat Board of Namibia; Malaysian Palm Oil Promotion Council, Australia Marketing International, World Bank, FAO, DFID, Woolworths, KFC, USDA) Usage of the data There are a wide range of different users from government institutes, traders, commodity organizations and financial institutes, and usage of the data varies by user. To summarize, the information found in the reports can be used for: Trading: Price discovery Contacting suppliers: Buying: Selling: Planning: Statistics: Actionable data: Dissemination of the data Yes Yes No No No Yes Yes Yes The information found in the reports is distributed to users subscribing to the reports. Cost of the service for the end user The cost to the end user depends on which reports the user subscribes to. An overview of the reports and the prices is provided in Table 12. Table 12: Cost of AMT services to end user TOPIC Freq. Reports per year Price (US$) Per report / Price (Rand) Per report / 63

64 yearly yearly Maize Weekly / / 4,000 Wheat Weekly / / 4,000 Soybean and Sunflower Weekly / / 4,000 Livestock Weekly / / 4,000 Maize Monthly / / 5,885 Wheat Monthly / / 5,775 Oilseeds Monthly / / 5,775 Livestock (beef, mutton, pork, poultry, ostrich and dairy; each commodity has a separate report) Monthly / / 9,350 Fiber (wool and mohair) Monthly / / 5,775 Vegetables Monthly / / 5,775 Sugar Monthly 11 82/ / 7,275 INDUSTRY REVIEWS Feedlot Yearly 1 1,121 8,975 Sugar Yearly 1 1,121 8,975 Wine Yearly 1 1,250 10,000 Citrus Fruit Yearly 1 1,121 8,975 Deciduous Fruit Yearly 1 1,875 15,000 Subtropical Fruit Yearly 1 1,250 10,000 Economy Bi-yearly / 750 3,000 / 6,000 Agricultural Economy Bi-yearly / 750 3,000 / 6,000 Trade Agreements Bi-yearly / 750 3,000 / 6,000 LIFESTOCK (Each commodity has a separate report) Beef, Mutton, Pork, Poultry, Wool, Mohair, Dairy, Ostrich FIELD CROPS (Each commodity has a separate report) Maize, Groundnuts, Wheat, Sorghum, Soybeans, Sunflower HORTICULTURE Bi-yearly / 750 3,000 / 6,000 Bi-yearly / 750 3,000 / 6,000 Vegetables Bi-yearly / 750 3,000 / 6,000 Potatoes Bi-yearly / 750 3,000 /6,000 Infokit Monthly / / 4,000 QUARTELY REVIEWS (Each commodity has a separate report) Maize, Wheat, Sunflower, Soybeans, Sugar Quarterly / 1,500 3,000 / 12,000 Beef, Mutton, Pork, Poultry, Ostriches, Quarterly / 1,500 3,000 / 12,000 64

65 Mohair, Wool Potatoes, Carrots, Cabbage, Onions, Tomatoes Quarterly / 1,500 3,000 / 12,000 Capacity hosting organization The capacity of AMT depends on the staff, which include a number of highly experienced personal specialized in various areas of the agricultural industry. Name Dr. Hermanvan Schalkwyk Ms. Minda Bornman Ms. Michelle Bornman Mr. Pieter van Wyk Mr. Pieter Cornelius Mr. Dirk Mulder Function CEO Marketing and Communications Manager Marketing Assistant / PA Heads the Field crops unit Heads the Livestock unit Heads the Vegetables and Agricultural Economy unit Conclusion with regards to quality of the system AMT provides a valuable service to financial institutes, traders, government agencies and commodity organizations, but no individual farmers subscribe to the information Efficacy of the Business Model No information was collected on the revenue stream of AMT or the costs involved in running the office and collect the data. AMT has managed to find a market for the provision of market information and consultancy services in South Africa and has built up a large subscriber base SAFEX The South African Futures Exchange established an Agricultural Markers division (AMD) in There were 84 trading seats taken up by interested parties at R50,000 each to form startup capital of R4.2M (about US$ 1m). The seat holders include private stakeholders such as banks, existing financial trading houses, new commodity trading houses and agricultural interest entities. Volumes of trade over the exchange are valued over US$100 million per day. SAFEX is recognized as a reliable source of price information in South Africa and the region. Commodities traded are: white and yellow maize wheat soya beans and soya meal sorghum sunflower seed Price information is disseminated through the SAFEX website and SMS messages from trading houses (AFGRI, SENWES, etc.). SAFEX is fully operational and sustainable, and guarantees successful transactions, physical stock (in certified warehouses) and available funds. In addition: 65

66 The bulk of the South African grain production is produced by a limited number of large scale farmers (less than 15,000 farmers) who have access/can be accessed by communication services Minimal to no government intervention in the market or predictable government interventions Support from the financial sector Storage and warehouse operator support Uniform system of grading Quality control of the stocks Agreed upon standards Promotion of SAFEX is through: Visits of farmers and producers with bank manager Media opportunities to promote the system Need to educate users before they will use the exchange Current developments are: Silo trading instead of the current differential price trading Trading of commodity futures from Zambia on the exchange as soon as the central bank allows South African companies to trade in dollars. Information needs for the industry: Physical crop estimates Physical stock estimates Other developments: The South African market is mature and companies see opportunities to expand into other countries in the region Price/Market Information System Development Trends The price/market information system development trends are as follows: A number of price/market information systems are currently being developed, which provide information and services beyond price/market information and potential viable business model opportunities. In most countries, governments are still running traditional price/market information systems. These type of systems are not able to provide actionable farmer/trader information but can provide statistical information for government planning processes. In a number of countries (Kenya, Uganda and Ethiopia), governments are becoming more involved and committed in the development of market information platforms which are capable of providing more actionable data for farmers and traders. However there are similar problems seen in the other platforms evaluated, such as how to collect relevant data and how to make them easily accessible to farmers. Many commodity exchanges have been established in the Southern and Eastern African regions with embedded price/marketing systems. However the original designs of the commodity exchanges did not work. The following trends can be noted in further developing the exchanges: 66

67 In some countries, government has taken up the role to support the exchanges. In Ethiopia, the government ordered certain commodities must be traded over the exchange. In Uganda, the government has committed itself to the success of the exchange, and the Kenyan government is exploring sponsoring a new, partly state-owned, partly private sector commodity exchange. All the commodity exchanges have revised operations from their original design and are working to make the exchange viable. In some countries, legislation is put in place to create a more enabling environment to operation the commodity exchange. Development of farmer helplines or call centers operated by experts in the agricultural sector to provide answers to farmers, however: Sustainability is an issue as there is no revenue created from the platform, or there is too little revenue to pay for experts operating the platform. The platform can easily be overwhelmed as the number of questions an operator can answer in a day is limited. Development of interactive voice response (IVR)platforms that are: Easier to understand by users with low literacy levels Can be implemented in more than one language Development is still in its infancy for successful implementation as an information media for the agricultural industry Still technical issues to be resolved Sustainability is an issue as there is no revenue created from the platforms 2.6. Conclusions General Conclusions, Not System Specific The following general conclusions (not system specific) with regards to price and market information services, and in relation to viable business models, are: A number of information services, either country or regionally based and mostly government or donor funded, are operational in the region and provide relevant price and market information. Currently this information from different sources is not systematically collected, repacked and offered commercially to interested parties. Most of the price and market information systems are based on two models: Price and market information is collected from the various traders/processors/exporters/etc. in the market. Price and market information are discovered from transactions over a commodity exchange. This type of price and market information is more transparent and easier to collect provided the commodity exchange is functional. SAFEX is the only price and market information system providing relevant information and operating on a sustainable business model. However conditions in South Africa diverge significantly from all other countries in the region. Replication of the SAFEX system in other countries requires the setup of an exchange and the creation of an environment in which the exchange can operate. The exchange is therefore extremely vulnerable to external factors over which it has limited or no control. An exchange will need to address the following external issues: Lobbying with government to change its policies to limit interference in the market. To date, this has not been successful in any of the countries. 67

68 Lobbying with government to enact a legal framework, including certified warehouse operation, in which an exchange can operate, which is a slow process. Establish warehouse operators and a warehouse receipt system as there are few warehouses providing secure product storage according to industry specification and/or warehouse receipt systems connected to an exchange. A price and market information system that is linked to a commodity exchange can only work if the commodity exchange operates satisfactory (i.e. high turnover, high number of transaction, financially self-sustainable). Collection of actionable price and market information is feasible and relatively costs effective (through an administrator-znfu 4455 or though enumerators-esoko). Information passed to end users is through: A SMS push system (ESOKO) though which a large number of users are provided with the information, yet hold the following constraints: o Expensive: for example to reach 20,000 users with 1 message will cost US$1000. o If the push message is focused on an exclusive group, where a large trader will register small traders that supply to him, a small number of people will be reached but no market information is available to the larger farming community. o All users of the platform need to be registered. o Payment of subscription fees for individual farmers/traders (ESOKO bronze membership is US$ 25/year) is not working. In practice, the uptake has been very low and collection costs of subscription fees are high. o There is a need to regularly update the user registry as there is always a percentage of phone numbers no longer active. This is possible if individual users pay for the service, which is currently not the case. A SMS pull system (ZNFU 4455) though which users initiate access to collected market information. This is cost effective from an SMS cost perspective (user feeds), but has the following constraints: o Experience has shown that without continued promotion, usage will drop significantly. o High costs of promotion. o Major training on how to use the system is needed, which is also costly. o Revenue collection can be done through a revenue sharing agreement with the cell phone company. However revenue is limited to the number of messages and fees charged; the small number of messages through the system is due to the low repeat of using the system and limited number of users that can be reached. A price and market information system that is only based on provision of price and market information (collected from various traders/processors/exporters/etc.) cannot yield a viable business model as: Individual end users are not prepared to pay substantially for the information The costs of getting the information to the end users is high The bulk of the end users (farmers) only require market information for a limited period per year The following developments are now taking place: ESOKO is developing their system to provide a business tool to companies subscribing to the platform that enables the company to communicate more effectively with their registered users (buying agents, distributors, farmers, etc.) 68

69 ZNFU (E-extension system) is developing their information services as follows: o Provision of a trading platform to farmers and traders o Communication system to farmers, companies and government (extension services) o Location based information system to farmers, events, etc. o Market information o Link to major mobile phone operator in terms of promotion costs and income generation of the system System Specific Conclusions AMT ZAMACE ACE AMT is able to provide market and price information to a large customer base (banks, trading houses, magazines, etc.) based on subscription fees paid by South African based organizations. AMT appears to operate on a viable business model. Although AMT claims to provide also regional agricultural data, in reality, only information on direct trade between SA and countries in the region is provided. AMT has the potential to collect regional market and price information from existing systems (ACE, ZNFU 4455, FEWS NET, etc.), repackage this information and offer it commercially to both South African and regional customers. E-extension The agricultural credit is not enacted through appropriate statutory instruments making it impossible to operate certified warehouses. The main interference in the main commodity maize market is through government programs. The current business model is dependent on the volume of trade which does not generate enough revenue for its operating costs. ZAMACE has been highly dependent on donor funding (USAID) and, without restructuring, it will not survive. ACE can operate certified warehouses yet only 4 are operational. There is limited interference in the maize market by the government. ACE is not currently financially viable and will continue to rely on donor funding to operate in the longer term. The plan to increase trade and income for the exchange by reaching out to more traders and farmers is unviable as the running costs of the additional services outweigh the expected incomes (i.e. the projected extra cost for the 20 call centers is US$120,000 while the projected total trade of the exchange is US$ 95,200). Currently under development and not yet operational. There is active interest by MUSIKA, a Zambian agribusiness development program, to further develop the system nationally. System provides market information and is used as a communication tool, direct marketing tool, trading platform, etc. 69

70 ESOKO The requirements for a viable business model are in place (airtime, payment for business information, subscriptions by major companies/grz, etc.). The system is still in the development phase and will need to properly piloted (also experimenting with business model opportunities) based on possible national rollout/up-scaling and regional roll-out. This is an off the shelf market information platform that requires minimal time to implement. Wellspring is in the process of developing and exploring the business opportunities for the ESOKO platform in Malawi. There are a number of opportunities for the platform to create revenue however it is necessary to see if they will actually generate revenue to cover costs and generate a profit. If the current 12 subscribers would pay for the subscriptions, the system could generate an income of US$18,000 per year. If the revenue from subscriptions are the main source of revenue, this would require a substantial increase in the number of subscribers to the system. There is a large element of donor participation compared to private sector participation in the system, and these users are more likely to buy into the system and pay for additional services such as training and consultancy services. TRANSZAM It is not possible to draw up firm conclusions as the system has been running for about 3 months and is in a testing/promotion phase. The requirements for a viable business model are in place (transporters paying subscription fees). Major income and business model success is expected to originate from regional transporters however more work is needed to develop the platform into a successful regional transport information system. Table 13 provides summery information of all the market/price information systems reviewed against the key criteria. Table 13: Summary information of all the market/price information systems reviewed against the key criteria Details Conclusion with regards to quality of the system Conclusions with regards to efficacy of the business model AMT Is run by a privately owned company Provide relevant market and price information to SA based companies and organizations User pay through subscriptions Viable business model Provides actionable market and price information in all major agricultural sectors to a target group willing to pay for the services Information must be useful as subscription customers are paying for the services AMT only focuses on customer information to SA based customers Viable business model 70

71 ZNFU 4455 Is run by the Zambia National Farmers Union Provide the following information: buying prices and contact details of companies buying produce User fees: to access the information the user pays for an SMS text message. Business model: there is no business model, the information is a public service. Information is available: through mobile phone by SMS text messages and on the internet E-extension Information platform in development by the ZNFU Provides information on market prices, events, company products and prices and can be used to view and submit offers to buy and commodities User fee: Charges are deducted from the users talk time, K 1000/week Business model: Charges from users via talk time and charges for companies to use the platform to send commercial messages Information is available: through a menu on the users mobile phone (on the Airtel network) ZAMACE Is run by: the commodity exchange, ZAMACE. Provide the following information: the transactions over the exchange and the bids on the exchange. The ZNFU 4455 is a useful market information system for small and medium scale farmers and for small and large traders. It provides actionable and timely price information on the buying prices of traders in Zambia. Data collection is done at a minimum cost and can be done by one system administrator who does not need more than two days a week to collect prices. The low cost of data collection makes the system sustainable as it does not generate any revenue. the system only reaches a small percentage of the total number of farmers, unique users of about 3500 per year and the total number of price request of over 8000 In order to maintain or expand the user base there is continues need for advertisement, printing of laminated cards and training of farmers. However the promotional activities are limited due to the high cost involved. The system has the potential to provide a wide range of tangible information (and trading) services which could lead to major increases in efficiencies in the agricultural sector The system is however still in development so we cannot say anything definitive or proven about the quality of the platform. In its current format the exchange is not successful The exchange did provide valuable market information to all players in the industry. Very few trades were recorded over the exchange and recently There is no business model for the running of the ZNFU 4455 service, it is a public service. Potential for a viable business model (airtime, payment for business information, subscriptions by major companies/grz, etc.) are in place However the system is still in the development phase and will need to properly piloted (also experimenting the business model opportunities) based on which national rollout/up-scaling can be done The business model depends on the volume of trade on the exchange. In its current format the exchange does not generate enough revenue for its operational cost ZAMACE has been highly 71

72 User fees: users of the exchange pay commission on trade, the trade information is available on the internet for free. Business model: based on the fees charged of trade over the exchange Information is available: distributed by to a mailing list and available on the internet TRANSZAM Is run by: the Zambia National Farmers Union Provide the following information: offers on goods to be transported and offers on empty backloads. User fees: transporters pay an annual user fee, to promote the platform it is free for the first 6 months. there were no trades at all. The current structure of the exchange is not working. First there is the conflict of interest associated with traders acting as brokers and at the same time being the owners of the exchange. Second the traders/brokers of the exchange conduct only between 2 and 3% of their trade on the exchange. The current structure is being changed, whereby the Lusaka stock exchange will take up a 51% share in the exchange. (more details are not available.) Major issues facing the exchange are: - High risk of contract noncompliance - Vulnerability of the exchange to market manipulation due to market thinness (low number of actors and low trading volumes) - In ability of the exchange to attract financial institutions to commit to the exchange - The ad hoc and unpredictable nature of government interventions in the commodity markets affects the trade on the exchange - There is no effective dispute resolutions to the users of the exchange in place - There is need for the development of statutory instruments that make trades conducted on the exchange legally binding - There are no ZAMACE certified warehouses in place - There is need for enactment of the agricultural credit act in order to be able to operate the certified warehouses and to issue warehouse receipts. The system is still in the start-up phase and it is difficult to draw firm conclusions at this stage Within a short time a considerable number of transporters have registered on the system The number of loads to be posted and backloads posted appears to be increasing There is no client feedback with developed on donor (USAID) funding and unless the current restructuring exercise addresses business model issues/financial sustainability it will not survive It is not possible to draw up firm conclusions as the system has been running for just about 3 months and is in a testing/promotion phase Potential for a viable business model (transporters paying subscription fees) are in place Major income is likely to come from regional transporters who could make the business model 72

73 Business model: Fees from the transporters subscribing to the platform Information is available: on the TRANSZAM website regards to the number of loads and backloads that have actually been transported through the system Demand for regional transport information appears to be relatively high viable (however more work will need to be done) ACE Is run by: Commodity exchange in Zambia Provide the following information: the transactions over the exchange and the bids on the exchange. User fees: users of the exchange pay commission on trade, the trade information is available on the internet for free. The exchange uses the ESOKO platform to disseminate trade opportunities to registered traders and farmers. Business model: based on the fees charged of trade over the exchange Information is available: on the internet and SMS text messages are sent to registered users. ESOKO Is run by: ESOKO Networks, the franchisee in Malawi is the company Wellspring Provide the following information commodity prices and price offers User fees: Users pay subscription to use the platform or receive price information Business model: based on user subscriptions, consultancy service and selling market information Information is available: by SMS text messages and on the internet. From the trade on the system we can see that the exchange attracts very few players and there is very little trade on the exchange, in that sense the exchange is not very successful. However the importance of the exchange is also in the role it plays in discovering how an exchange can work in a country with mainly small holder farmers, large number of small scale traders and very few large scale traders. This requires a long term approach which should allows for experiments and failures to happen. The positive signs of increased trade in this year, the use of the ESOKO platform and the use of the warehouse receipts are all new developments. None of them are tested and for each of them it would be important to see what the cost benefit to the exchange is. The ESOKO platform is a useful market information and communication platform for companies that want to reach customers. The success of the system in reaching a larger part of the farmers will depend on the number of companies and organization that will subscribe to the platform and the number of users they will register. There is at this moment no evidence that the system will be taken up by individual farmers whereby they will subscribe to the system, even if they did it would be hardly cost effective to do the administration and the collection of fees for this group. ACE in its current operation is not able to become financially viable and will need to continue to rely on donor funding to operate The plan to increase trade and therefore income for the exchange ACE aims by increasing the usage of the ESOKO platform to reach out to more traders and farmers seems to be unviable as the running costs of the additional services outweigh the expected incomes (i.e. the projected extra cost for the 20 call centers is US$120,000, while the projected total trade of the exchange is US$95,200) ACE is operating as a project, relying for large parts of its current expenditures on donor funding, and will viable need institutional anchoring for long term survival The company Wellspring is still in the process of developing and exploring the business opportunities for the ESOKO platform in Malawi. There are a number of opportunities for the platform to create revenue, however for all of these opportunities it is still necessary to see if they will actually generate enough revenue to run the platform profitable If the current subscribers (a total of 12) of the platform would pay for the subscriptions, whereby we estimate that the users would require a gold subscription (US$ 1500 per year), the system would generate an income of 73

74 The system is designed in such a way that organizations or companies that want to use the platform can do so over the internet, without the requirement of servers or software. To run the system there is need to involve enumerators for the collection of market prices; this is one of the requirements from ESOKO Networks to operate the platform. US$ 18,000 per year. If the revenue from subscriptions would be the main source of revenue this would require a substantial increase in the number of subscribers to the system. There is a large element of donor participation compared to private sector participation of the system. The users of the system are mainly donor funded, with the advantage that these users are more likely to buy into the system and will also pay for additional services like training and other consultancy services required. 3. IDENTIFICATION AND ANALYSIS OF INFORMATION GAPS IN ZAMBIA AND MALAWI 3.1. Brief Value Chain Analysis of Selected Commodities Zambia Maize Maize is the major crop produced by the majority of the Zambian farming community (around 1,000,000 households). For most farmers, maize is a food security crop produced for home consumption; around 15% of small-scale farmer households are responsible for the sale of 75% of the crop. Maize is also a political crop with the government spending the bulk of its agricultural budget on the following programs: Farm Input Support Program (FISP) though which farmers are provided with subsidized fertiliser and seed Food Reserve Agency (FRA) though which maize is bought at a uniform price across the country, and is considerable higher than the market price It is expected that government will reduce the maize subsidy programs over the coming years. This is expected to result in a maize production/marketing system that is more market related and will also require many small-scale farmers to diversify into other crops. The maize value chain provides the following constraints for small-scale farmers: Inputs High input costs (non-subsidized) Lack of resources and credit access to acquire inputs Production Soil fertility Late planting due to late land preparation Poor weed control Inability to buy hybrid seed and sufficient fertilizers Processing and storage Limited storage facilities available 74

75 Warehouse receipting systems not operational Sales and distribution Transport constraints Market Maize is a political crop; FRA buying, export bans, etc. Overproduction due to FISP and FRA Competitive export markets limited to the DRC Legumes and Oil Seeds Small-scale farmers produce groundnuts and sunflower, however, small scale farmers have an increased interest in soybeans which are primarily (80%) grown by large scale commercial farmers. The legume and oil seed value chain identifies the following constraints to small-scale farmers: Inputs Difficulty to access good quality planting seed Lack of resources and credit access to acquire inputs Production Knowledge of production techniques Late planting due to late land preparation Poor weed control Poor post harvesting practices (aflatoxin issues in groundnuts) Processing and storage Limited storage facilities available Few processors (except for soya beans) Sales and distribution Transport constraints A number of processors have problem sourcing small-scale farmer produce Market Limited market opportunities for groundnuts and sunflower Small-scale farmer soya beans downgraded (quality issues) Vegetables Small-scale farmers produce tomatoes, onions, green vegetables and cabbage. The vegetables value chain analysis notes the following constraints: Inputs Difficulty to access good quality inputs Lack of resources and credit access to acquire inputs Production Knowledge of production techniques (rotations, diseases, etc.) Poor post harvesting practices Processing and storage Inadequate storage facilities at farmer level Trading facilities lack handling facilities Few large processors Sales and distribution 75

76 Transport constraints Market Market conditions subject to daily change Markets controlled by informal brokers at expense of small-scale traders and farmers No major processors Livestock Livestock provides a major source of income to Zambian farmers, where cattle provide more income to small-scale farmers than maize. Chicken and goats are also important livestock to small-scale farmers. The livestock value chain analysis identifies the following constraints: Inputs Difficulty to access good quality inputs Limited disease control (tick control and vaccination) services available to smallscale farmers Limited access to credit to buy poultry inputs (mainly feeds) Production Knowledge of production techniques (housing, breeding, diseases control, etc.) Lack of service provision in veterinary issues Low productivity and high mortality Processing and storage Inadequate holding facilities at farmer level Few abattoir facilities for goats Sales and distribution Transport constraints No auctioning facilities Market Limited market opportunities in major small-scale farmer cattle areas Market control by a few major companies (Zambeef, etc.) No auctioning Feed lotters have difficulty to access small-scale farmer cattle Few major processors are buying goats Malawi Maize Maize is the key crop produced by Malawian farmers for both food security and income. Maize production has been subsidized through government programs for the last 4-5 years, which has resulted in a major increase in production. The country has become selfsufficient and has been exporting the crop. Through ADMARC, the Government of Malawi (GoM) is trying to set floor prices for farmers, however ADMARC is only able to pay for around 8% of the marketed crop, and prices on the open market are generally much below the set floor prices. Around 10% of farming households actually sell the crop on the market; out of a total maize production of 3.8 million tons, around 0.65 million tons is marketed. 76

77 The future of the subsidy program is uncertain as the GoM is facing major budget constraints and may have to scale down. The maize value chain analysis notes the following constraints for small-scale farmers: Inputs The sector has been relying on subsidized inputs, however the future of the subsidized input supply program is uncertain Due to constraints in the major cash crop (burley tobacco), many farmers lack money to purchase inputs Production Soil fertility Late planting due to late land preparation Poor weed control Inability to buy hybrid seed and sufficient fertilisers Processing and storage Limited storage facilities available High costs of chemicals for storage Warehouse receipt system not operational Sales and distribution Poor road infrastructure Transport constraints faced by many farmers and traders Market Maize marketing often takes place though a number of trading hands (small local trader, medium scale trader, large traders and end users). The majority of farmers who are selling sell small quantities (1-4 bags/farmer only) Lack of local bulking centers Little trust between traders (also ADMARC) and farmers Legumes and Oil Seeds Groundnuts are by far the most important grain legume, and soya beans and sunflower are produced on a more limited scale. The legume and oil-seed value chain analysis notes the following constraints: Inputs No or limited access to good quality planting seed Lack of resources and credit access to acquire inputs Input delivery systems not functioning well (especially in the more remote smallholder areas Production Possibility of drought Late planting due to late land preparation and shortage of labor Poor soil fertility Poor post harvesting practices (aflatoxin issues in groundnuts) Processing and storage Bad storage practices Limited number of processors Sales and distribution Transport constraints 77

78 Poor road infrastructure A number of processors have problem sourcing small-scale farmer produce Market Lack of bulking centers Lack of market information Use of bad scales by traders, mistrust between farmers and traders Quality concerns (grading, aflatoxin) Vegetables Small-scale farmers produce tomatoes, potatoes, onions, green vegetables and cabbage. The vegetables value chain analysis notes the following constraints for small-scale farmers: Inputs Difficulty to access good quality inputs Lack of resources and credit access to acquire inputs Production Knowledge of production techniques (rotations, diseases, etc.) Poor post harvesting practices Processing and storage Inadequate storage facilities at farmer level Trading facilities lack handling facilities Few large processors Sales and distribution Transport constraints Poor roads leading to high transport costs Market Market conditions subject to daily change Seasonal over production for a number of crops (tomatoes) Markets controlled by informal brokers at expense of small-scale traders and farmers No major processors Livestock The country s cattle population is around 700,000 animals concentrated in the Northern region, while the number of goats is around 1.3 million. The majority of households own some poultry (mainly free range). The livestock value chain analysis notes the following constraints for small-scale farmers: Inputs Difficulty to access good quality inputs Limited disease control (tick control and vaccination) services available to smallscale farmers Limited access to land for grazing Lack of improved breeds Production Limited access to land for grazing Lack of improved breeds 78

79 Knowledge of production techniques (housing, breeding, diseases control, etc.) Lack of service provision in veterinary issues Low productivity and high mortality Processing and storage Inadequate holding facilities at farmer level Sales and distribution Transport constraints Poor road infrastructure Market Limited market opportunities for farmers Lack of marketing and market information Few major processors are buying goats 3.2. Information Gaps Faced by Farmers Small-Scale Farmers Small-scale farmers in both Malawi and Zambia are responsible for a major part of the production of the key food security crops and commodities. They also face the following information gaps related to the different aspects of the selected commodities: Inputs Information where to source inputs Price information related to inputs Information on how to use some of the inputs (chemical application rates, type seed for different areas, etc.) Information on credit access possibilities (out-growers, small-scale farmer credit schemes, etc.) Production Technical knowledge on how to produce specific commodities Post-harvest issues Product specifications required by the market Difficulty to locate and access service providers (extension staff, veterinary services, etc.) Processing and storage Storage options available to farmers Storage knowledge Sales and distribution Difficulty to find transporters Difficulty to make use of cheap backloads Market Price information (district, provincial and national level) Information with regards to product specification required by market (seize, uniformity, etc.) Where to find/contact major traders and processors Large Scale and Corporate Farmers 79

80 Large scale and corporate farmers have good access to communication and are approached directly by major service providers within the value chains. The information gaps at this level are lower than that experienced by small-scale farmers. Large scale and corporate farmers face the following information gaps: Inputs No major gaps Production No major gaps Processing and storage Storage options available to farmers Sales and distribution Difficulty to make use of cheap backloads Market Some farmers sell to a broker/main trader based on a long relationship without reviewing other options 3.3. Information Gaps Faced by Traders Small-Scale Traders Small-scale traders provide an important and often unrecognized marketing service to the small-scale farmer sector. Small-scale traders face the following information gaps: Inputs Not applicable Production Not applicable Processing and storage Storage knowledge Storage options available for traders Access to finance options for traders Sales and distribution Difficulty to find transporters Difficulty to make use of cheap backloads Market Difficulty to locate farmers who have reasonable quantities to sell Prevailing prices in producing areas Price information at end users (processors, breweries, exporters, etc.) to which they make supply Information with regards to product specification required by market (seize, uniformity, etc.) Major Commodity Traders/Exporters/Processors Major traders face the following information gaps: Inputs Not applicable Production 80

81 Not applicable Processing and storage Not applicable Sales and distribution Difficulty to make use of cheap backloads Storage options Market Difficulty to access (location, contact details, etc.) commodity more directly from small-scale farmers Prices of competition Import and export procedures and regulations Production forecasts both local as well as regional 3.4. Information Gaps Faced by Other Actors Finance Sector The finance sector faces the following information gaps: Production levels Prices of commodities and price trends Uncertainty with regards to government interventions (subsidies, export bans, etc.) Warehouse receipting options Government Agencies Government agencies face the following information gaps: Lack of production information (crop forecasts, import needs, etc.) Lack of market and price information (farm gate, trader level, markets, processors) Information needed for agricultural policy and regulatory development 4. RECOMMENDATIONS FOR PRICE/MARKET INFORMATION SYSTEM DEVELOPMENT Based on the analysis, a number of recommendations to effectively and sustainably develop market-driven price/market information systems to serve value chain stakeholders in Southern Africa is summarized below for SATH consideration. Annex 3 provides information on risk management related to each of the recommendations noted Recommendations for Development of Regional Information Systems TRANSZAM Pursue/support to further develop the transport platform. Specific reference is made to SATH on the TRANSZAM grant concept proposal in Annex 2. SATH should support the implementation of the transport system in the following areas: Invest in the upgrade of the platform to include all countries in the region and consider functionality of the platform to allow mobile phone browsing, advertising and customer rating/reviews of transporters. 81

82 Promote the platform across the region: Tanzania, Malawi, Mozambique, South Africa, Namibia, Zimbabwe, DRC and Botswana. Annex 4 provides details with regards to SATH methodology of TRANSZAM development, SATH results, impact measurement and investment costs Provision of Regional Information From Existing Systems on Commercial Basis A number of information systems, either country or regionally based and mostly government or donor funded, are operational and provide relevant price and market information. The information is not systematically collected, repacked and offered commercially to interested parties. An organization like AMT is providing market price and market information on a commercial basis to a wide subscriber base in South Africa and within a viable business model (paid subscriptions). The information is limited/focused to South Africa however an AMT has the potential to collect regional market and price information from existing systems (ACE, ZNFU 4455, FEWS NET, etc.), repackage this information and offer it commercially to both South Africa based and Southern African regional customers. The following recommendations are present for SATH consideration: Actively pursue/support the informational development from existing systems to collect, repack and offer commercially to interested parties. Engage an organization, like AMT on a consultancy basis, to review possibilities for the systematic collection of price and market information from existing regional information systems, repackage this information and possibilities to offer the information on a commercial basis to both SA as well as regional customers. Provide a competitive grant solicitation to collect information from existing regional systems, repackage and offer this information to SA and Southern African regional customers. Potential organizations which could make use of the grant are AMT, SAFEX and commercial banks. Annex 5 provides details with regards to SATH methodology, results and impact measurement Recommendations for Country Based Systems with Regional Replication Potential ACE To support the development of ACE, SATH should: Support ACE with the development of a market based business plan for the organization (donor funded only for limited investments or start-up costs). The development of the ACE business and financial plan should: Be conducted by a highly qualified business consultant, with the following qualifications: o Business plan development expertise o Excellent understanding of the functioning of commodity exchanges in the Southern African context o Practical knowledge of the Malawian agricultural development context 82

83 o Organizational and strategic development expertise The business plan should also consider: o The institutional anchoring of ACE, as it cannot continue to operate as a project o A viable business model o Must show that ACE operations (including the price/market information system) can be sustained from its business (commodity trading operations) and be profitable o Review ACE charges to users (0.2% fee for offers of around 10 tons is not viable) o Establish a low costs country wide system with certified warehouses (with local warehouse operators) where farmers and traders can deposit their produce for offer on the exchange and/or access warehouse receipts o Make price/trade information available to key stakeholders (farmers, traders, processors, etc.) o Provide opportunities for SATH support to acheive ACE viability and embedded price/market information system development Based on the ACE business plan, SATH could provide limited start-up support for viable/sustainable ACE operations. This could be in the following areas: Management and operational support for a limited period Support to the establishment (systems, communication, training, franchising arrangements, etc.)of certified warehouses in all major rural areas in Malawi Further development of the ACE price/market information system (embedded in ACE operation), making the information available to small-scale farmers and small-scale traders Annex 6 provides details with regards to SATH methodology, results, impact measurement and investment costs ZNFU E-extension System The following recommendations with regards to the ZNFU E-extension are made to SATH: Actively pursue/support the further development of the E-extension system in conjunction with MUSIKA Pursue further development of the E-extension system in term of supporting the implementation of a proper pilot phase in 3 districts and making the pilot results relevant for regional roll-out of the E-extension system A number of key conditions linked to the development of a sound business model need to be fulfilled/confirmed prior to MUSIKA/SATH support, and include: Confirmation by the selected mobile phone provider that it is possible to charge users. A revenue sharing agreement between Airtel and ZNFU that allows for a viable business model. Draft MUSIKA/SATH support program for E-extension piloting with support in the following key areas: E-extension further platform development (final software development, adoption of new USSD platform, stress testing, payment module development, installation of the platform, etc.) Development of E-extension pilot program to include: 83

84 o E-extension management system development (operation, feedback, development, regional E-extension issues, etc.) o E-extension piloting in 3 major agricultural districts (Mumbwa, Chipata and Choma Districts) o Deployment of staff (1 for each pilot district) to pilot districts who will be responsible for training activities, district information collection, monitoring use, etc. o Development and implementation of E-extension promotion program (paid for by mobile phone company) o Development and implementation of E-extension training program Implementation of the E-extension pilot program Based on piloting result effect changes on the E-extension system in terms of increasing the effectiveness of the system and the development of a viable business model Based on the piloting results (effectiveness of E-extension system and business model development), roll out the E-extension system nationally (all major agricultural districts) and review possibilities for regional implementation Annex 7 provides details with regards to SATH methodology, results, impact measurement and costs ZAMACE The following recommendations are made to SATH: Do not pursue/support the further development of ZAMACE (including its price/market information system) Closely follow ZAMACE developments over the next months and review progress in the following areas: ZAMACE merger with Lusaka stock exchange in terms of strategic and operational development and business model development Development of the agricultural credit act in terms of relevant Statutory Instruments enabling the establishment of certified warehouses, warehouse operators and warehouse receipt systems development Involvement/interference of GRZ in the maize marketing (FRA operations, export bans, etc.). It is noted that the new PF government could make fundamental changes in this regard In case of substantial progress, SATH may consider providing support to: Develop a business model Increase accessibility of ZAMACE price/market information beyond internet/ to enable small-scale traders/farmers access to the information Support the (provided there is a sound business case) certification of rural warehouses (actual certification, training of warehouse operators, etc.) ESOKO The following recommendations are made to SATH: Do not pursue support or further development of ESOKO Closely follow ESOKO developments over the next months and review progress in the following areas: 84

85 Franchise development of Wellspring in terms of the development of its business model ESOKO system information provision to farmers, traders, etc. in terms of business model development (shift from donor dependency to private sector income generation) In case of substantial progress, SATH may consider the following support: Develop a business model Review possibilities to upscale viable (private sector paid) ESOKO price/market information systems in Malawi and the region 85

86 ANNEX 1: Detailed Description of E-extension system 1 Introduction The E-extension system currently developed by the ZNFU is a menu based system that works on any cell phone using the Airtel network. The aim of the platform is to provide farmers with relevant information on prices, weather, company information, inputs, prices on inputs and events. The system is also a platform where farmers can submit offers to sell their produce. Companies can use the platform to inform farmers, advertise, view offers from farmers and source produce. They can also use it as an inexpensive communication tool with staff members, agents, etc. Projected revenue is primarily from users; when they use the platform on their phones talk time is deducted. The menu items provide the following information: Messages Under messages, the user will find messages from companies and organizations that use the platform. These messages can be informative or commercial/advertisements. A message can be send to a user based on his location (province or district), his affiliation with a company/organization or a profile made of the user by the data mining module. The data mining module makes a profile of each user based on the platform used, his location, frequency of use, products he offered, offers he viewed, etc. Events Under events, the user can find all the agricultural events in his area, such as agricultural shows, field days and training provided by companies like the ginning companies or conservation farming. Buy or Sell products Under buy or sell products, the user can submit offers to buy or sell and also view offers by others. To sell or buy a product the user has to select the product group, the product, the quantity and the price. To view the offers the user has to select the product group, the product and the area, then he can see offers. Market prices Under market prices, the information on buying prices for 16 commodities in over 200 companies is found. The information is the same as found in the ZNFU 4455 system. Company products Under company products the user can see details of product sold by companies and the prices. User details Under user details the user information is shown and it is also possible to change this information. Here one finds the users province and district. 2 Detailed description of the platform 86

87 The platform can be accessed by dialing *100#. The example below demonstrates a menu selection: ZNFU SERVICE 1 Messages (18/6) 2 Events (9/4) 3 Buy / sell products 4 Market prices (83) 5 Company products 6 User details MESSAGES 1 Weather (1/0) 2 Dunavant (9/4) 3 Vet (2/2) 4Maco (3/0) 5 ZNFU (3/0) 0 Back The user is presented with the main menu. To go to one of the menu items the user has to press the reply button. The user has selected menu item 1 (messages) and has to press the send button to go to the next menu item. The phone is waiting for about 1 to 2 seconds for the next menu item. The menu item message is displayed. Process flow of the system The E-extension system interacts with the user by presenting menus from which a user has to select a menu item; the process flow of the system is as follows: STEP 1. Check the billing. The user is charged K1000 per week with a maximum of using the platform 15 times. If the user has not paid, the user will be presented with the menu below. If the user has paid, the menu in step 2 will be shown. 87

88 ZNFU SERVICE Get agricultural information, prices, sell your products and win weekly prices. For K1000 per week you can use the system 15 times If the user selects 1 he will be charged K1000 and can use the system 15 times for a period of one week. If the user selects 0 the session will be terminated at no cost. STEP 2. User registration If the user is new to the system, the user will be asked about his location. First the system will ask in which province the users lives, and then in which district. Select the province where you live: 1 Northern 2 Southern 3 Eastern 4 Lusaka 5 Luapula 6 North Western 7 Western The system asks for the province Select 3 Select the district where you live: 1 Chipata 2 Lundazi 3 Petauke 4 Nyimba 5 Mambwe 6 Chama 7 Chadiza The system asks for the district The user will be presented with the main menu as described under step 3. STEP 3. Main menu Now the user has paid (step 1) and has registered where he/she lives (step 2), the user will from now on presented with the following main menu: 88

89 ZNFU SERVICE 1 Messages (13/23) 2 Events (110) 3 Buy or Sell products 4 Market prices (84) 5 Company products 6 User details This is the main menu - For messages it is indicated that there are a total of 23 messages and 13 unread messages. - There are a total of 110 events listed - There are 84 market prices listed Menu item 1, Messages Under messages the user will find information messages, messages are based on: 1. Location of the user (province or district) 2. User belonging to a company or organization (example: Dunavant or Ministry of Agriculture employee) 3. Profile of the user (frequent user, selling certain commodities, was interested in certain products) An example of the messages menu: MESSAGES 1 Weather (0/1) 2 Dunavant (4/9) 3 Vet (2/2) 4 Maco (0/3) 5 ZNFU (0/3) 0 Back Under the message menu there are messages for: - Weather 1 message (already read) - Dunavant 9 messages (4 unread) - Vet 2 messages (2 unread) - MACO 3 messages (all read) - ZNFU 3 messages (all read) 89

90 Examples of messages: Weather for southern province Hot and dry in most areas. Heavy showers in Mazabuka. Rain expected over the weekend 0 back Dunavant shed in Magoya has received cotton seed. The Mumbwa shed will receive seed next Thursday. 0 Back Vacinate your cattle for food and mouth this month Dr. Ricky will vaccinate in malaba Saturday at Mr Bwalya s farm. Dr Ricky Back Menu item 2, Events Under events the user will find information on events in his area (district). An example of the events menu: EVENTS 1 Seed Co (3/3) 2 Dunavant (5/5) 3 ZNFU (2/2) 4 Cargill (0/3) 5 MACO (0/3) 0 Back Under the events menu there are events for: - Seed Co 3 events (3 unread) - Dunavant 5 events (5 unread) - ZNFU 2 events (2 unread) - Cargill 3 events (all read) - MACO 3 events (all read) 90

91 Examples of events: The monthly Dunavant cotton field day in Magoya will be held at Mr Mwale s farm Friday 14 July at 9 hours. Mr Mwale Seed Co field day, Kabota farm in Mabala area. Friday 10 hours. Topic: Maize, soy and groundnut varieties. Contact Mr Cargill field day Wednesday 10 hours at Mr Chota farm chimambala. Topic: planting methods. Mr Chota Back Menu item 3, Buy or Sell products If the user has never used this menu item before the user will be presented with the following screen: (Note: A district is divided in blocks and a block into camps, the user has to select his block and camp only ones.) Select 1 Select 1 BUY AND SELL The first time you want to submit or view an offer you have to select your area and camp. 1 Next Select your area: 1 Munga 2 Mpima 3 Waya 4 Munyama Select your camp: 1 Munga 2 Kawama 3 Chililalila 4 Mukobeko The user will now be presented with the option to submit an offer to sell, view all selling offers, and submit an offer to buy and to view all buying offers: 91

92 SUBMIT A SELL OFFER Select 1 Select 1 BUY AND SELL 1 Sell your products 2 View selling offers (22/12) 3 Buy products 4 View buying offers (18/9) BUY AND SELL(L1) Select the type of product you want to sell: 1 Crops 2 Vegatables 3 Livestock 4 Services 0 Back BUY AND SELL (L2) Select the product you want to sell: 1 Maize 2 Soy beans 3 Ground nuts 4 Sweet potato 5 Cassava 0 Back Select 1 Enter 200 Enter BUY AND SELL (L3) Enter the quantity in 50 Kg bags BUY AND SELL (L4) Enter the price per 50 Kg bag or 0 for negotiable BUY AND SELL (L5) (valid for 7 days) Your offer to sell: Maize 12 bags (50Kg) Price K43,000 per bag 1 OK 2 Cancel If the user selects 1 this offer will be submitted and will be in the system for 7 days. 92

93 View offers Select 2 Select 1 BUY AND SELL 1 Sell your products 2 View selling offers (12/22) 3 Buy products 4 View buying offers (9/18) BUY AND SELL(L1) View offers: 1 Crops (6/14) 2 Vegatables (6/6) 3 Livestock (0) 4 Services (0/2) 0 Back BUY AND SELL (L2) 1 Maize (4/4) 2 Soy beans (2/10) 0 Back Select 2 Select 1 BUY AND SELL (L3) Select a province: 1 Northern (2) 2 Central (2) 0 Back BUY AND SELL(L4) Select a district: 1 Kabwe (2) 2 Mkushi (2) 0 Back BUY AND SELL (L5) 1 K54000 (200bags/50Kg) 2 K49000 (27bags/50Kg) 0 Back Select 1 93

94 BUY AND SELL (L6) Maize Camp: Chitambi Date: bags/50kg K54000 per bag/50kg Tel: Back (viewed 23 times) This farmer has submitted an offer to sell 200 bags of maize. - The price is K 54,000 per bag - He is based in Citambi camp (Kabwe) - His telephone number is Menu item 4, market prices Under market prices the user will find the buying prices of 16 commodities from over 200 companies in Zambia. Pices are collected weekly and is the same information found in the ZNFU 4455 system. The following menu will be displayed to the user: Select 1 Select 1 MARKET PRICES (L1) 1 Maize (23) 2 Soy beans (9) 3 Beef (18) 4 Ground nuts (3) 99 Next page 0 Back MARKET PRICES (L2) 1 Lusaka (7) 2 Southern (4) 3 Eastern (5) 4 Copperbelt (4) 5 Central (3) 0 Back MARKET PRICES (L3) 1 chatlsk (Lusaka) K gbmlsk (Lusaka) K Fdrlsk (Lusaka) K950 4 Zdnlsk (Lusaka) K850 Select 1 94

95 MARKET PRICES (L4) Product: Maize Price: K1000 Chatlsk Chat Milling, Plot Number 5237, Muzilikazi Road off Lumumba road, Lusaka. Menu item 5, Company products Under company products the user can see product details and prices from companies; the user has to select first the company and then the products: Select 1 Select 1 COMPANY PRODUCTS (L1) 1 Afrivet 2 Seed Co 0 Back COMPANY PRODUCTS Find here retail prices for Afrivet products. We have agents in the whole country. Our number in Lusaka is Continue COMPANY PRODUCTS (L2) Select product group 1 Dips and sprays 2 Dairy Hygiene 3 Equipment 0 Back 95

96 COMPANY PRODUCTS (L3) Select product 1 Ecobash 5L K480,900 2 Ecotraz (250) 5L K14,700 3 Supadip 100ml K14,700 4 Triatix Stock Spray K9,450 Select 1 Select 1 COMPANY PRODUCTS (L4) Ecobash 5L A combination acaricide for cattle to control ticks with a detaching effect. Also cattle lice, flies and screwworm infestation 0 Back 3 System architecture The E-extension application can be accessed by dialing *100# in a phone on the Airtel network. The way the E-extension system is integrated in the Airtel network is show in the following graph: Airtel USSD Hosted at Airtel ZNFU E-extension application User (dial *100#) INTERNET ZNFU E-extension website ZNFU administrator Hardware/software The software of the E-extension system is running on a server (ZNFU owned) that will be located at the Airtel offices. Access to the server by the ZNFU administrator is through an internet connection, the same internet connection also enables users to see the information on the internet. USSD gateway The E-extension platform was successfully tested on the Airtel USSD gateway. With the introduction by Airtel of a new USSD gateway, there was an error in one of the menu items and this still has to be resolved. Collecting payments from the platform The company that developed the new USSD gateway is expected to finalize the payment module in October This will enable the E-extension system to charge users for using the platform. (At this moment the payment option is not implemented in the E-extension system.) 96

97 4 Administration of the system The administrator of the platform manages the data in the system. All events, messages and market prices in the system are entered by the administrator from information received either by or phone. Companies who use the system can change their own data for the company products. In order to send messages or announce events they will have to communicate with the systems administrator. The administrator performs the following tasks: - Collect data from the field for: messages, events, market prices - Upload the information in the platform - Monitor the usages and performance of the platform - Report to management - React to enquiries and complains from users The amount of work for the system administrator will depend on the season and it is estimated that two systems administrators could manage the platform. 5 E-extension website The E-extension system also has a website with general information about the E- extension system, information on events, buy and sell offers and the market prices. The website is useful for traders as it enables them to see all offers in the system, these offers can be viewed by product and by area. The selling offers page: 97

98 5. Business model The aim of the E-extension platform is to provide farmers with relevant information on prices, weather, company information, inputs, prices on inputs and events. They can also use the platform to sell their produce. Companies can use the platform to inform farmers, advertise and see offers from farmers and source produce. They can also use it as a cheap communication tool with staff members, agents, etc. In order for the E-extension system to become successful, the system must reach a large number of farmers. This is not only for revenue purpose from the user fees but also for the willingness for companies to pay for using the platform. However the main revenue is expected from individual user fees. It is necessary to have as much relevant information in the system as possible so users will use it often. For this there is need for the participation of a large number of agricultural companies providing relevant information. Making the charges too high for companies will undermine the system. Running costs The running costs of the platform are mainly for the salaries of the two administrators and the communication cost involved in contacting the companies and organization for information. Qty Item Unit cost month Total per month Total per year 2 Salary Administrator US $ 600 US$1,200 US$ 14,400 98

99 2 Communication cost US $ 150 US$ 300 US$ 3,600 TOTAL US$ 1,500 US$ 18,000 Promotion cost The promotion costs of the platform will include regular promotion through the following different media: TV (as part of the regular mobile phone operator promotion program) Radio both national as well as District based local radio stations (as part of the regular mobile phone operator promotion program) Newspapers (as part of the regular mobile phone operator promotion program) Bill boards, posters, etc. Since only one mobile phone operator will be selected to exclusively implement/roll out (together with the ZNFU) the E-extension program, it will be provided with a competitive advantage over the other 2 operators in the country. This competitive advantage can translate into maintaining or increasing market share. One of the conditions of the exclusive roll-out will be that promotion of the E-extension system will be paid for by the selected mobile phone operator (from its regular promotion budget). Income from the platform Income from the platform is from individual users and companies. Individual users are charged K 1000 per week with a maximum of using the platform 15 times per week. The information in the system is updated daily to encourage users to use the platform on a daily basis. There will be periods of the year when there is little activity in the agricultural sector, during these periods we can expect a drop in the usage of the system. For the number of potential users Airtel submitted the number of subscribers they have in the rural areas for the four most productive provinces, excluding the urban areas, these are Central province, Southern province, Eastern province and Lusaka province. The total number of subscribers in these areas is over 1 million. The target for the platform is to reach 100,000 regular users, who will use the platform at least twice a month. The projected income from the individual users who will use it for 2 times a month is: Projected number of users Charges per week Average usages per month Total revenue per month in Kwacha Total revenue per month in US$ Total revenue per year in US$ 100,000 K K 200,000,000 US$ 40,000 US$ 480,000 Note: This is income that has to be shared with Airtel, the ratio will depend on the revenue sharing agreement between ZNFU and Airtel. Companies using the platform can submit information on events free of charge; the same applies for informative messages. For the commercial/advertisements type of messages companies will be charged. Charges are based on the number of times a message is read. The charges are US$0.05 per read message. If we have for example 5 commercial messages per week read by 50% of the users, revenue from these commercial messages is: 99

100 Commercial messages per week Number of times a message is read Total number of message read per week Charges per read message Revenue per week Revenue per month Revenue per year 5 25, ,000 US$ US$ 625 US$ 2500 US$ 30,000 Investment cost For the further development, implementation and promotion of the platform there is need for further investments in the following areas: - Software/hardware - Development of a promotion plan and promotion material and a pilot of the platform in the districts - Organizational support Software/hardware Initial investments were made in the development of the software, the purchase of one server and 2 routers and a design study. The design study was done on farmer information needs, companies providing extension work, and the potential of the platform to be used by farmers and companies. The current status of the E-extension platform is: Category Item Status Cost Hardware Hardware Software Dell rack server 2 Cisco routers E-extension platform Purchased US$ 3500 Purchased US$ First version of the software developed and successfully tested on the USSD Airtel gateway - Airtel is introducing a new USSD gateway; first test gave an error on one menu item. All other menu items worked fine - Airtel is introducing a billing module within the new USSD gateway, waiting for the implementation and the specifications - First test with farmers were done, information on the platform very useful. Training needed to use the platform. (similar experience was found by ZANACO bank using the platform for mobile banking) US$ 25,000 Total US$ 31,000 Further development/investment needed for the hardware and software: Category Item Details Estimated Hardware no further investment Software Core E-extension platform - Further testing with latest version of the new Airtel USSD gateway. - Testing the performance with high volume of users Cost 100

101 Software Software Backend for the administrator to update the data Backend for the companies to update their data - Include changes based on piloting the platform - Adapt based on the pilot of the platform - Improve the look and feel - Include changes based on piloting the platform - Might need expansion of the functionality based on the piloting of the platform Software Payment module - Receive the specifications from Airtel - Develop software module Software Data mining module - Still has to be defined and implemented Software Website - Improve look and feel - Link to the database of the E-extension platform - Make the website readable on mobile phone browser Software Monitoring of trainers module - If trainers are paid for each farmer trained this module needs to be developed. - When a trainer has trained a farmer he can submit the cell phone number in the platform - A farmer is considered trained when he also uses the platform after the training day Total US$70,000 Development of a promotion plan and material From the initial test of the platform with a small group of farmers in Mumbwa and the experience from the ZNFU 4455 market information system the development of a promotion plan and promotion material will need to focus on the following elements: 1. Users will only understand how to use the platform when they have tried for themselves how to use the platform 2. Training of a farmer does not mean that the farmer will also tell or train others. 3. There is need to engage farmers in the rural areas as it is difficult to reach them through regular media The promotion of the platform can best be piloted in for example three districts with a large and productive number of farmers. In these areas the piloting of the platform can be supported by the agricultural companies that work with farmers. The companies identified in the initial study where the ginning companies (about 200,000 farmers contracted) and CFU (15,000 farmers in Mumbwa district). All these companies are committed to promote and use the platform. One model of promoting/training that could be explored is to implement incentives for doing the trainings. By training for example 50 trainers whose task will be to train others and giving them K 2500 (US$ 0.50) for each person they have trained. The monitoring of the number of trained farmers can be implemented in the platform. If done successfully, the training costs per farmer would be paid back if each trained person uses the platform 3 times. 101

102 Based on the above model the estimated training costs of the platform in three districts would be: Item Details Unit cost Costs Training coordinator (Duration 4 months) Training of trainers Training materials Payments for each farmer trained Accommodatio n, traveling and comms costs. Responsible for: - Development of training/promotion plan - Development of training material - Identify 50 trainers in each of the three districts - Training of the trainers - Monitoring of the trainers performance - Payment of the trainers for each trained farmer Venue and meals for three training sessions in each of the three district. - Development of the training materials - Printing of the training materials for 150 trainers (plus additional a copies) - Printing of 40,000 copies of hand out material Estimated that in each of the three districts 10,000 people will be trained, K2500 (US$0.50) per trained farmers - Travel 4 times to each district, total number of trips is 12 - Accommodation for 2 nights per visit, total number of nights 24 US$ 3000 / month US$ 500 per training US$ 2000 US$ 1000 US$ 5000 US$ 12,000 US$ 4500 US$ 2000 US$ 1000 US$ 5000 US$ 15,000 US$ 15,000 US$ 200 US$ 75 US$ 2,400 US$ 1,800 Total US$ 44,700 Organizational support A coordinator is needed to: - Prepare the agreements for the platform with ZNFU and Airtel - Advice ZNFU on the revenue sharing negotiations with Airtel - Make appointments with the Ministry of Agriculture for their participation - Recruit the training coordinator and the two administrators - Develop the implementation plan for the pilot of the platform in the three districts - Develop and implement a communication plan/strategy for the collection of information on events and the updating of this data in the platform - Develop and implement a communication plan/strategy for the collection of information on messages and the updating of this data in the platform - Promote the use of the company products menu with companies - Collect the data of the product details from the companies and train the companies how to upload this information - Weekly and monthly progress reports and where necessary advice on adapting the platform and promotion strategy. - Look at the option to include a cropping calendar in the system and design the content - Communicate with the following companies and organizations for participation: Seed Companie Feed companie Chemical Fertilizer Companie Traders Organization s Cotton Equipme nt 102

103 s s companies s Companies MRI National Milling Cropserve (2 companies) Zambia Fertilizer Afgri CFU Chipata cotton Seedco Nutrifeed Afrivet Greenbelt Zdenaki Land O lakes Cargill Zamseed Novatech Livestock services Export Trading CHC Milk collection Centers Panar ATS Omnia Etc. ZNFU commodity organizations Olam / Continental Alliance Pioneer MRI Agro ZAMACE Dunavant Agrivet Ministry Agriculture Saro Estimated cost for the coordinator Item Details Unit cost Costs Coordinator Accommodation, travelling and comm. costs. Duration 12 months Responsible for: see above - Development of training/promotion plan - Development of training material - Identify 50 trainers in each of the three districts - Training of the trainers - Monitoring of the trainers performance - Payment of the trainers for each trained farmer US$ 4000 / month - Travel to the three districts US$ 1000 / month US$ 48000,- US$ 12,000 Total US$ 60,

104 ANNEX 2: TRANSZAM Grant Concept Proposal TRANSZAM is a web based exchange for transport and was developed by the ZNFU because transport is the main cost factor for the agricultural industry and in short supply during certain periods of the year. The system targets transporters and all players in the agricultural industry in Zambia and is also used by other industries like the mines, traders, cement companies, etc. The system enables customers that need to transport their goods to post them on the exchange. Transporters are also able to post empty backloads on the system; all transporters subscribing to the platform are listed on the website in the transporters directory. The system was launched in July The number of transporters that have registered on the system is 91 and the number of loads posted on the system is 47. The total weight of all the goods posted on the system to be transported is over 308,785 tons, representing about 10,295 truckloads. The business model of the transport system is based on subscriptions paid by the transporters. Users who post loads on the system can do this for free. The proposed subscription fee for one year is US$ 200. In order to promote the system and have as many users buying into the system, no subscription fee is charged for the first 6 months. The business model is based on the system being mainly a transport system that would be used in Zambia for the local transporters. From the postings of loads and backloads on the system it can be seen that there is a much larger potential/interest for the system to be used as a regional system. The number of posts for goods to be transported in the region is larger than the number of postings of goods to be transported within Zambia. With the opportunity identified to develop TRANSZAM into a regional transport exchange, this is a proposal to the Southern Africa Trade Hub for a grant for TRANSZAM to extend into the region. Requirements to extend TRANSZAM into the region In order to expand the system into the region, there is need to expand the functionality of the platform and to promote the platform in the targeted countries. The proposed targeted countries are: Tanzania, Malawi, Mozambique, South Africa, Namibia, Zimbabwe, DRC and Botswana. A detailed description of the expansion and promotional requirements needed are noted below. Table: Expansion and promotion requirements of the platform for the extension into the region Expansion of the functionality of the platform - Update the software to include all the countries and main destinations and towns - Include a customer / transporter rating system - Include the option of advertisement on the platform - Allow browsing using mobile phones - Change the name of the platform to reflect it being a regional and not just national 104

105 Promotion of the platform in the region - Contact all the transport organizations in the region - Develop a promotion strategy for the countries in the region: Tanzania, Malawi, Mozambique, South Africa, Namibia, Zimbabwe, DRC and Botswana. Estimated investment cost for TRANSZAM regional development The estimated investment costs for further TRANSZAM development are provided in table below. Table: Estimated investment costs for TRANSZAM development Item Details Monthly cost Total cost Personal support for 18 months Operational cost Market information TA support Software development for regional use and other functionality Promotion of the platform - System administrator US$ 1000 US$ 18,000 - Travel cost - Communication cost US$ 1000 US$ 18,000 - TA US$ 20,000 - Promotion cost in 8 US$ 7,500 per country US$ 30,000 US$ 60,000 Total US$ 146,

106 ANNEX 3: Risk Management Risk management recognizes a range of possible outcomes arising out of uncertainty, provides structured systems for identifying and analyzing those risks, and for devising and implementing appropriate responses. A risk analysis of 3 price/market information systems recommended for further SATH support/development has been prepared in the form of a Risk Management Matrix (RMM), which is summarized below. Although not exhaustive, the matrix identifies key risk potentials that may affect the program and outlines strategies for risk management and mitigation. As a general principle, risk priorities 1 and 2 are acceptable, while risk priorities 3, 4 and 5 should receive significant attention and be comprehensively addressed. Table: Risk Management Matrix Risk Event Risk Consequence Likei hood ZNFU E-extension system Key conditions for linked to business model development not met E-extension piloting is not able to provide sufficient information to further develop/roll out the system E-extension proves not to have a viable business model (not enough users, not able to generate income, etc.) TRANSZAM TRANSZAM not able to develop towards a more regional transport The system will not be able to charge mobile phone users for use of the system Pilot outcomes will not provide information for further development Pilot will not be able to guide further and viable business model development SATH investment wasted E-extension system not viable (no business model) SATH investment wasted Fewer loads on the systems Reduced income generation Impac t Risk Priorit y Risk Mitigation Strategy M H 4 Unless key conditions are fulfilled no SATH support to E-extension development L H 3 E-extension piloting program design ensures that the piloting will provide the right type of information/results/impact/ business model feedback Pilot program will be supported by dedicated/qualified management Adequate funding available for the pilot M H 4 Quality of E-extension piloting program (including management/oversight) Possibility to make changes to the E- extension system able to improve the business model M&E system will provide relevant information L H 3 Regional TRANSZAM development part of SATH support 106

107 system Risk Event Risk Consequence Likei hood TRANSZAM business model not viable Lack of trust by users of the transport system stops users using the system ACE ACE business plan not developed professionally and not realistic. Limited ACE buyin in the ACE business plan ACE not anchored institutionally into an appropriate organization.transzam not viable TRANSZAM not viable and will remain dependent on ZNFU/donor support Low use of the system Loss of income Loss of reliable players in the industry using the system Key expected business plan results not attained ACE not becoming viable and sustainable No sustainable impact in the Malawian agricultural sector Limited ownership by ACE ACE remains operating on a project basis Reduced long term sustainability of ACE Reduced lobbying capacity of ACE Impac t Risk Priorit y Risk Mitigation Strategy M H 4 Business model development key part of TRANSZAM development Regional development will increase TRANSZAM business model development possibilities M H 4 Include a rating element in the platform where users can rate a transporter Administrator can remove non-performing transporters Corporation with national and regional transport organizations in terms of QC M H 4 Selection of appropriate business consultant based on proven expertise and understanding of Malawi context ToR for business plan development provides comprehensive guidance SATH support during business plan development Close involvement of ACE during business plan development M M 3 Institutional anchoring of ACE key aspect of ToR for business plan development SATH could support organizational capacity support in this area Not possible to establish a low costs country wide system for certified warehouses Without certified warehousing being widely available ACE operations and viability will be handicapped Reduced services provision for small- H H 5 Key aspect of the business plan ToR Possibility for SATH support in establishment of country wide system for certified warehousing 107

108 Risk Event Risk Consequence Likei hood ACE generated price/market information not becoming available to smallscale farmers and small-scale traders Malawi s economic development handicaps the operation of ACE scale farmers and traders Small-scale farmers and small-scale traders not able to use information for their business decisions Small-scale farmers not able to increase income Reduced use (and viability) of ACE Reduced agricultural production Reduced ACE viability Impac t Risk Priorit y Risk Mitigation Strategy M H 4 Key aspect of business plan ToR Possibility for SATH support in ACE price/market information accessibility to small-scale traders and farmers M H 4 Business plan development will need to include an appropriate risk analysis with regards to Malawi s economic operating environment and produce mitigating measures Provision of Regional information from existing systems on a commercial basis Limited commercial demand for this type of information Wrong organization operation the systematic collection, repackaging and commercial distribution The system will not be commercial viable The system will not be operated effectively Reduced commercial viability M H 4 AMT has the relevant expertise engaged to review the commercial potential for this type of service L H 3 AMT consultancy report should provide way forward with regards to type of organization to operate the system Public solicitation of proposals will enable SATH to select the most appropriate organization Priority listing of risks Likelihood Impact Risk Priority High High 5 High Medium 4 Medium High 4 High Low 3 Medium Medium 3 Low High 3 Low Moderate (MO) 2 Moderate (MO) Low 2 108

109 Low Low 1 109

110 ANNEX 4: SATH Methodology for TRANSZAM Development The proposed methodology is as follows: Consultation and agreement with ZNFU on support to TRANSZAM development (business model and regional development) Development of TRANSZAM development program (to be supported by SATH), which will include a viable business model Support to the implementation of the TRANSZAM development program Monitoring the implementation of the TRANSZAM development program SATH will be able to track the results and impact of the TRANSZAM development though the following M&E arrangements: Regional TRANSZAM development Number of transporters registered (also regional spread of registered companies) Number of users of transport registered (also regional spread) Number of loads and backloads posted on the system Number of loads and backloads fulfilled through the system Income generated through subscriptions from transporters Business model development The estimated SATH investment costs for further TRANSZAM development are summarized below. Table: Estimated SATH investment costs for TRANSZAM development Item Details Monthly Cost Total cost Personal support for 18 months - System administrator US$ 1000 US$ 18,000 Operational cost - Travel cost - Communication cost US$ 1000 US$ 18,000 Market information TA support - TA US$ 20,000 Software development for regional use and other functionality Promotion of the platform - Promotion cost in 8 US$ 7,500 per country. US$ 30,000 US$ 60,000 Total US$ 146,

111 ANNEX 5: SATH Methodology for AMT Development The methodology is as follows: Consultation and engagement of AMT or another relevant organization to execute a consultancy for provision of information from existing systems on a commercial basis Based on the outcome of the above-mentioned consultancy, SATH to provide a competitive grant solicitation for the actual systematic collection of information from existing regional systems, repackaging and commercial offering of this information to SA and Southern African regional customers SATH will be able to track the results and impact of the provision of information from existing systems though the following M&E arrangements: Information from existing regional systems systematically collected, repackaged and provided to on commercial basis to SA and Southern African regional customers Number of SA and regional customers acquiring information (paying for it) Financial sustainability of this type of information provision 111

112 ANNEX 6: SATH Methodology for ACE Development The methodology is as follows: Consultation and agreement with ACE on support to the organization Engagement of a consultant for ACE business plan development by SATH (STTA) SATH support (activity, grant funding, possibility for open competitive grant funding for certified warehouse establishment) to ACE business plan implementation SATH will be able to track the results and impact of ACE development through the following M&E arrangements: Record ACE baseline information (income and expenditures, profitability, income generated from core trading activities, trade figures, number of certified warehouses operational, number of farmers/traders making use of ACE services (including price/market information services), etc.). This information should be collected as part of the business model consultancy. ACE income and expenditure monitoring with a focus of ACE income generated from trade activities Reduced dependency of ACE on donor funding, within 2-3 years ACE should be able to fund all its core expenditures from its trade facilitation activities Trade (commodities, tonnes, value of trade) facilitated though ACE Number of farmers (also gender), traders, processors, exporters, etc. making use of ACE services Number of certified warehouses operational, also number of certified warehouse operators trained, viability of certified warehouse operations Number and value of warehouse receipts provided through certified warehouses ACE price and trade information accessed by farmers and traders SATH estimated investment cost for ACE development The recommendation for the support of ACE by SATH is for the development of a business plan which will detail the real investment cost needed. For the development of the business plan, the estimated costs are between US$30,000 and US$35,

113 ANNEX 7: SATH methodology for ZNFU Development The methodology is as follows: Consultation and agreement with ZNFU and MUSIKA on SATH support to the development of the E-extension system Conformation that key conditions (possibility to charge and gain income for the ZNFU) for business model development of the E-extension system are in place Development of E-extension pilot program (to be supported by SATH), which will include a potential viable business model Support to the implementation of the E-extension pilot program Monitoring the implementation of the E-extension pilot program Based on results of the E-extension program (special reference is made to the development of a viable business model) make an informed decision with regards to supporting national and regional roll out of the E-extension system SATH will be able to track the results and impact of the E-extension development (if piloting will be feasible) though the following M&E arrangements: The E-extension pilot development is expected to provide information with regards to: Use of the E-extension system by farmers, traders, companies, development programs, etc. Type of services used by the different users of the system Number of hits recorded in pilot districts and income generated from using the system in the 3 districts Type of commercially viable information (i.e. list of all poultry farmers in one district, which can be used for direct marketing by feed mill companies) that the E-extension system will be able to generate. The value of this type of information should also be able to come out of the pilot program Value of E-extension system to companies/government departments/programs in terms of reduction of communication/training/monitoring costs Effectiveness of the promotion program Effectiveness of the training program During the implementation of the pilot E-extension system SATH will be able to monitor the following key aspects of the system Use of the system in terms of users (farmers, traders, companies, etc.), type of services used through the system (events, trading platform, inter-company communication, etc.) and value of the type of services used to the users E-extension business model development, providing sufficient information to make the judgement on the viability of the E-extension business model The estimated SATH investment costs for further E-extension development are provided below and costs are expected to be shared with the MUSIKA program. Table: Estimated SATH investment costs for E-extension development Item Details Total cost Further platform development - Additional functionality - Testing implementation - Adapting the platform during the pilot phase US$ 70,

114 Pilot - Pilot in 3 districts - Dedicate staff in district (1 field facilitator/district) - Co-ordinator - Running cost - Training development and implementation US$ 200,000 Total US$ 270,