Unlocking Private Sector Investments within the Cassava Value Chain Summary Briefing 27 th June 2014 Introduction This study has been prepared by the Natural Resources Institute (NRI) of the University of Greenwich, in response to WEF Grow Africa and IDH s request to undertake a cassava value chain study to highlight issues and provide answers to key questions on constraints to investments by private sector companies in the value chain. The report provides an overview of issues related to industrial use of cassava. It gives details on current initiatives in Nigeria, Ghana, Mozambique and Zambia. This is followed by an examination of critical gaps for using cassava as an industrial raw material, a summary of conclusions and ideas for going forward. Cassava (Manihot esculenta Crantz) is an edible root crop, produced on an annual/biannual basis in tropical and subtropical areas (see figure 1). In sub-saharan Africa (SSA), cassava is mainly a food crop grown by smallholders and semi-subsistence producers, often women, who sell the surplus. It grows well in poor soils with limited labour requirements and the crop is usually intercropped. Compared to other staple crops, cassava requires less labour during production, however, it requires considerable postharvest effort due to its bulkiness and because the roots are highly perishable. A key factor in considering its use as an industrial raw ingredient is its very short shelf life, of around 48 hours, its bulkiness (partly due to its 70% water content) and the decline in starch content from the time of harvesting. About 262 million tonnes of cassava were produced globally in 2012, with Africa contributing 149 million tonnes. Production of the crop depends on the supply of quality stem cuttings, 1
which are bulky and highly perishable as they dry up within a few days. Pest and diseases present a significant constraint which is estimated, along with poor cultivation practices, to cause yield losses as high as 50% in sub-saharan Africa. Disease-resistant varieties give yields of about 50% more than local varieties. Post-harvest strategies include the development of technologies that improve processing efficiency, leading to higher output while reducing input requirements (e.g. labour, fuel). Quality of cassava based products (e.g. High quality cassava flour or HQCF) and food safety aspects play a key role too. Figure 1: Cassava production map, Africa Source: DADTCO Industrial uses of cassava 1 Apart from the range of traditional food products, cassava and cassava based ingredients are used in different industrially manufactured products, including foods, confectionery, sweeteners, glues, plywood, textiles, paper, biodegradable products, monosodium glutamate, and drugs. Cassava chips and pellets are used in animal feed and alcohol production. Cassava peel, an important by-product in many traditional and modern cassava processing industries, is used as animal feed in many parts of Africa. In industrial processing, cassava is a source of starch which can be used in various applications (see Figure 2). Starch can be further processed into modified starch products which are used as ingredients in a range of industries (e.g. sorbitol in toothpaste manufacturing). 1 This section draws heavily on studies undertaken by NRI and the Cassava: Adding Value for Africa (C:AVA) project in Nigeria. The project is also operational in Ghana, Uganda, Tanzania and Malawi. For more information see www.cava.nri.org 2
Figure 2: Cassava Value Chain Producers Processors End-markets Traditional food processing Gari, lafun, fufu, etc. Fresh cassava roots (FCR) Animal feed Ethanol Ruminants, poultry, aquaculture Fuel, industrial use, drinks On-farm / rural processing of chips or grits HQCF/Milling industry Starch Bread, biscuits, snacks, etc. Paperboard, beer, etc. Glucose, sorbitol, etc. Beverages, toothpaste, etc. NB. In addition to dried chips and grits, animal feed may also contain by-products from HQCF processing and flour milling. Source: FAO (2013) HQCF High Quality Cassava Flour (HQCF) is prepared from peeled and grated cassava, that has been de-watered, dried to 10-12% moisture content, milled and screened to give a fine flour capable of passing through a 0.25mm sieve. The C:AVA project uses an average conversion ratio of 4 to 1 (i.e. one tonne of fresh cassava roots gives 250 kg of HQCF). It has been stated that due to the fact that HQCF does not contain gluten HQCF-inclusion rates higher than 10% would make it difficult to bake bread of the same volume as bread baked with 100% wheat flour. An option may be the use of flour improvers which would allow the incorporation of HQCF at 20% or higher in flour for bread baking. Although it is often stated that HQCF can be included at relatively high levels in biscuits (e.g. 30 to 40%), depending on the type of biscuit produced (e.g. requiring soft or hard wheat flour) work by NRI and C:AVA Nigeria has shown that HQCF can be used at 10% in hard and soft-dough biscuits but at 20% problems were encountered with machinability and 3
reductions in product volume. Satisfactory trials have been conducted by companies in countries such as Uganda, including storage of packaged biscuits over several months. Another market for HQCF is the packaged sausage roll market. Companies that normally use wheat flour or maize starch as a binder for the meat filling may become interested in HQCF due to rising costs of raw material. Tests carried out in sausage roll factories in Nigeria showed that HQCF did prove to be highly effective as a binder for the meat filling and is believed to have virtually completely replaced wheat flour and maize starch for this purpose. Other bakery and food products for which HQCF can be used include cakes, chapattis, donuts, etc. In particular, where gluten content and raising power of the flour are not an issue, the use of HQCF could be attractive provided the price and continuity of supply are competitive. Starch Starch has a wide range of food and industrial applications (e.g. native starch and modified starches such as dextrin, liquid glucose, dextrose monohydrate, dextrose anhydrous, sorbitol, calcium gluconate, citric acid). Although maize is the dominant raw material used for starch, cassava is also used, particularly in Asia (55% of cassava used for starch production compared to 4% in Africa). As an example of modified starch, starch can be hydrolysed using enzymes to form glucose syrup, which is used in the food and beverage industries as a thickener to give products body. Glucose syrup can be further refined to produce pure glucose for use as a sweetener. Alternatively, the syrup can be treated with glucosisomerase to form high fructose syrup (HFS), which has the advantage of intense sweetness at low concentrations and is favoured for carbonated drinks. Animal feed Substantial research into cassava utilisation in feed rations has been carried out in Africa during the last three decades. Cassava chips offer a readily digestible source of carbohydrate energy (85-93% that of maize grain) as an alternative to maize in animal feed formulations. However, unlike maize cassava contains very little protein so any formulation containing cassava must contain a suitable protein supplement. For cassava to compete with maize, the cost of the cassava plus the protein supplement (such as soy or fish meal) must be significantly cheaper than the existing maize- based formulation. There can also be technical problems; cassava chips are best suited for use in cattle and pig rations. For use in poultry and aquaculture feeds the cassava must be pelletised. In the case of poultry feeds, pelletisation increases palatability and avoids increased water intake and problems with dust that may lead to chronic respiratory syndrome. In addition, cassava can be used in aquaculture feed, in particular in that it increases the floating capacities of pellets, which are advantageous for fish species preferring floating feed. Ethanol Ethanol, including cassava-based ethanol, has a range of end-uses, including: o o Potable ethanol, used in alcoholic beverages; Industrial alcohol used by: Chemical and pharmaceutical industries; 4
Substitute for petrol in motor car fuel; Replacement for kerosene in cooking. The classic feedstock for ethanol production is a source of fermentable sugar, such as molasses. Cassava roots contain starch which can be used but the starch must first be hydrolysed into fermentable sugars. This extra step makes cassava the number 2 choice in terms of feedstock. Nonetheless, in some African countries there are very limited supplies of fermentable sugars and even if more sugar-cane is planted it is more likely to be refined and used for other purposes. Beer Government policies in many African countries encourage the sourcing of more ingredients locally. Whilst in some countries brewers focus on using locally-sourced maize and sorghum, cassava has potential as a replacement for 70% of imported barley in beer. SABMiller have launched cassava-based beers in Mozambique (Impala Beer) and Ghana (Eagle beer) and are looking at launching a similar product in South Sudan. Guinness Ghana have also launched a cassava-based beer (Ruut Extra) but SAB-Miller has the most experience of cassava-based brewing starting with their operation in Mozambique. Instant fufu and packaged garri Fufu is a wet-fermented cassava dough. Over the past two decades a dried odourless product has been developed as a convenience food known as instant fufu. Instant fufu is essentially a fermented and dried flour (more coarsely milled than HQCF) that can be mixed with hot water and steamed to form a stiff dough that resembles, but is not identical to, the traditional fufu product. It has the advantage of being shelf-stable and quick and easy to prepare when compared to the traditional product. Currently instant fufu is a niche market with about four Nigerian SMEs involved in production; one SME dominating the market with about 50% of the share of annual sales. Garri (or gari) is a shelf-stable (10-12% moisture content) granular product made by roasting and drying small particles of fermented partially dewatered cassava mash. The West African market for traditional garri is very large. Many attempts have been made to industrialise garri (current sales in Nigeria are 50 100 tons p.a.) but these have been unsuccessful partly because of the high cost of the end product. Cassava Country Information Nigeria is the largest global cassava producer with a production of 54 million tonnes of roots harvested on an area of 3,850,000 hectares (ha) in 2012 (www.faostat.org). The average yield is about 14 tonnes per hectare, which represents an increase of 35% over 10 years. More than 90% of the production takes place on smallholder farms (estimated to be above 5 million). The crop is intercropped with crops such as maize, legumes, etc. The Nigerian cassava production is concentrated in the South and South Central parts of the country. Production in the North takes place but only on a small scale. According to the Nigerian Cassava Master Plan (2006), the Nigerian cassava system is dominated by smallholder farmers cultivating less than 2 hectares of cassava (average of 0.5 ha). Although it is considered subsistence in nature, substantial quantities of cassava and processed products are sold into the traditional food market (e.g. fufu, gari, lafun). 5
Figure 3 highlights issues encountered in the Nigerian cassava value chain with an emphasis on industrial processing. The other three countries analysed (i.e. Ghana, Mozambique, and Zambia) demonstrate very similar issues in their cassava value chains as far as bottlenecks and constraints related to input supply, production, aggregation, and industrial processing are concerned. Also, additional cassava industry related issues have been highlighted below in Table 1 on current/planned industrial cassava based products in the four countries analysed. Figure 3: Issues in the Nigerian Cassava Value Chain Regarding an enabling environment for cassava related investments, Governments in all four countries have embarked on initiatives on cassava (e.g. Presidential initiatives on Cassava; Nigeria s Cassava Transformation Agenda Project (CTAP); earmarking of Staple Crop Processing Zones; Root and Tuber Improvement and Marketing Programme in Ghana; Cassava Development Strategy for Mozambique; and Zambia Cassava Sector Development Strategy; National Task Force on Acceleration of Cassava Utilisation in Zambia). At the same time, some initiatives have struggled to meet expectations on the ground (e.g. in farming communities) in that they were slow to take off, underresourced, or met resistance from established groups (e.g. importers and processors of agricultural commodities). 6
Table 1: Current/planned industrial cassava based products in countries analysed Product/industry Companies FCR Required (t) (2-5 years) # of smallholders Nigeria (cassava production in 2012: 54 million tonnes of fresh roots) High Quality Cassava Flour (HQCF) Starch Brewing Thai Farms, DADTCO, SMEs using flash-driers Matna Ltd SMEs Multinational beer brewers (all plan to use starch or glucose) 276,000 t (bakery) 24,000 (paperboard) 23,000 2,000 125,000 10,500 62,000 5,200 Issues Unreliable supply of roots close to plants increases CoP Project support needed (NGOs, donors, Govt.) Govt. policy (re imports, support for production and use of cassava; enabling environment - infrastructure) Ethanol (fuel, pharmaceutical) Allied Atlantic Distillers (just started) 53,000 4,500 Location of factories (e.g. problems with water supply) Industrial alcohol Allied Atlantic Distillers 141,000 12,000 Aquaculture feed Feed millers 74,000 6,200 Affordable working capital for aggregators and processors Starch, glucose, sorbitol Total 755,000 63,400 Cargill (plans) Unilever (plans) Unilever (plans) 300,000 18,000 20,000 Ghana (cassava production in 2012: 14.5 million tonnes of fresh roots) High Quality Cassava Flour (HQCF) Starch SMEs (i.e. village processing units) with project support; Caltec Venture Ayensu Starch Company (ASCO); Recently reopened with Diageo support Cassava cake DADTCO; for beer >10,000 2,000 Plywood Paperboard Animal feed Plywood producers (mainly in Kumasi) Paperboard companies in Accra Feed millers, pig, and poultry industry??? 88,000 20,000 14,375 3,000 HQCF required by bakeries, institutions (e.g. schools), composite flour and biscuit producers; paperboard industry (although trials required by the latter). 16,000 5,833 8,000 1,500 30,000 16,898 Total 172,000 43,606 Both Accra Breweries (SAB Miller) and Guinness (Diageo) already produce cassava beer Plywood industry uses industrial grade cassava flour Feed producers and users interested but require more demos and pilots 7
Product/industry Companies FCR Required (t) (2-5 years) # of smallholders Issues Mozambique (cassava production in 2012: 10 million tonnes of fresh roots) Beer brewing CDM/SAB Miller >10,000 ~2,000 Organisation of Ethanol (domestic fuel) HQCF/starch CleanStar? 2,000 Export Trading Group 5,000 10,000 1,500? smallholder cassava producers to ensure continued supply of roots Long-term commitment by investors required if projects are to succeed Other issues similar to other countries Total 45,000 50,000 ~5,500 Zambia (cassava production in 2012: 1.3 million tonnes of fresh roots) Beer brewing Animal feed ZB/SABMiller (plans to use wet cake) Tiger Feeds (past usage) >10,000 ~2,000 Scattered supply of roots close to plants. Project support needed (NGOs, donors, Govt.) ~500 ~100 Govt. policy (positive but limited resources) Lack of commercial service providers ( missing middle ) Total ~10,000 ~2,000 Conclusions and lessons learnt Despite considerable effort and investment, cassava production is still essentially at semisubsistence level using low input systems and productivity in all the countries investigated compared to countries in Asia. Though opportunities for industrial processing of cassava exist in all the countries, industrial production is less than 1% of production in all the countries investigated. Involvement in using cassava/cassava-based raw material requires long-term commitment and is a high risk activity with the potential of making good money but not a quick profit. Children need to grow up on cassava (as many have on tea, coffee and green beans) and governments need to recognise the benefits of a successful sector and to provide actual support. Unreliable supply of roots close to processing plants increases costs of production and requires local sourcing models, which are sustainable and reliable. Factories need to be close to cassava production areas to minimise transport costs and maximise root starch 8
content retention. The importance of smallholders particularly women farmers, the main producers of cassava - in supply models is recognised and considered vital. Setting up a cassava-based initiative requires long-term commitment and investment together with company acceptance that it is a separate initiative that should be placed outside normal quarterly accounting requirements. Calculating a fair price for farmers is paramount but problematic; all stages in the value chain need to be profitable to make it sustainable. At the same time, total costs need to be contained in order to be competitive both for import substitutes and for exports and also to provide a low risk and reasonable return for investors. Service provider involvement is needed, which could include SMEs, NGOs, farmer organisations, to get smallholder fresh and processed cassava supply organised, ensuring that female farmers and processors are not excluded. There needs to be coherent government policy on provision of an enabling environment to provide the necessary infrastructure and to minimise investment risk, along with proactive promotion of the sector and active engagement with commercial users. Affordable working capital needed for aggregators and processors, in particular for local SMEs and farmers. Local and international companies need more awareness raising and demonstration trials regarding technical matters and financial benefits of using cassava-based raw materials e.g. in animal feed; the baking industry. These are the vital missing middle i.e. companies which transform cassava into the form required to supply and sustain the cassava-using industry. Partnership and innovation platforms are needed (involving private and public sectors - policy makers, research extension, standards setting bodies; NGOs, CBOs, donor organisations) in each country. International forums are also useful avoiding a multiplicity of platform in order to increase effectiveness. Grow Africa could become such a focal point and coordinate work on best practices, case studies, cost estimates, supply models and be a data repository. Industrial processing of cassava can play a key role to further enhance the potential of cassava production and transformation through smallholder involvement. Going forward: actionable activities and interventions Activity/Issue Action/Intervention Responsibility Time horizon Unreliable supply of roots; reducing risk of sourcing cassava Long-term commitment (min 5-10 years) required Designing appropriate, equitable sourcing models (see appendix 3); Improving inputs, services, skills of SHF; Improvement of logistics; establish strong engagement with SHF/aggregators to build Companies (boards, management) Investors, farmer organisations, agricultural research, extension service (including NGOs) 9
Location of factories close to cassava production areas Rural roads, water, security - strong PPP with staple processing zones Finance for farmers, off takers & processors to cut cost of borrowing Importance of smallholders particularly women, in supply models is recognised Fair price for farmers which enable all stages in the value chain to be profitable Addressing the missing middle Coherent government policy on provision of an enabling environment Negative image of cassava sector International forums working together to increase effectiveness. Processing facilities for different products as most African countries do not have a very big starch market Promotion, campaign, substitution, linkages knowledge and trust Planning location of processing sites and supply schemes, including consideration of necessary infrastructure Timely commitment to ensure all addressed on ongoing basis Private credit agencies; use of moveable assets as collateral Buying policy to ensure min % of women get supply contracts Analysis of price data; starch measurement methods Favourable policies; publicity;demonstration trials on technical matters and financial benefits of producing/using cassavabased raw materials e.g. in animal feed; baking industry Innovation platform to involve all stakeholders (private and public sectors - policy makers) in each country Proactive promotion of the sector and active engagement with commercial users Find ways to link cassava initiatives and avoid duplication Need diversified product range beyond starch and ethanol Countries part of Grow Africa - could undertake to review/explore full potential of cassava economics, substitution (research study/focal point) Consideration of incentives along the value chain to encourage wider uptake (including exports) country by country along the whole value chain. PPP involving central & local governments and companies State government, MNCs Central Bank; Ministry of Finance; Ministry of Agriculture; Ministry of Industry Service provider/ NGOs Ministry of Agriculture and cassava buyers. Ministry of Industry, Companies, SMEs, Chamber of Commerce Ministries; companies; NGOs; farmer organisations; research institutes; extension service; standards setting bodies; CBOs; donor organisations Ministries of Agriculture, Industry, Media Grow Africa, AGRA Companies Grow Africa could become such a focal point and coordinate work on best practices, case studies, cost estimates, supply models and be a data repository. 10