ACF

AGRICULTURAL CONSULTATIVE FORUM

DRAFT REPORT ON

THE GROUNDNUTS VALUE CHAIN ANALYSIS FOR ZAMBIA

Prepared by the Agricultural Consultative ForumP/Bag 16, Woodlands

Lusaka, ZambiaTel/Fax 260-211-263083

March, 2013

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Contents1. INTRODUCTION.........................................................................................................................3

2. GROUNDNUTS PRODUCTION AND SALES...........................................................................4

2.1 Producing Areas...........................................................................................................................4

2.2 Production Trends.......................................................................................................................4

2.3 Groundnuts Marketing.................................................................................................................6

3.0 THE STRUCTURE OF ZAMBIA’S GROUNDNUT VALUE CHAIN – STAKEHOLDER ANALYSIS...........................................................................................................................................7

Smallholder farmers......................................................................................................................8

Food Processors.............................................................................................................................8

These provide a major market for intermediaries and farmers, as they service the needs of the consumers. They are involved in this business for profit...............................................................8

Consumers.....................................................................................................................................9

Value chain service providers........................................................................................................9

4. OPPORTUNITIES AND CHALLENGES IN THE GROUNDNUTS VALUE CHAIN IN ZAMBIA.............................................................................................................................................10

4.1 Challenges.................................................................................................................................10

4.2. Opportunities............................................................................................................................12

5. CURRENT RESEARCH.................................................................................................................13

6. KEY FINDINGS, CONCLUSIONS AND RECOMMENDATIONS.............................................14

6.1 Key Findings and Conclusions:.................................................................................................14

6.2 Recommendations:....................................................................................................................15

6.3 Key stakeholders for consideration at the national workshop..............................................16

REFERENCES....................................................................................................................................17

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1. INTRODUCTION

Groundnuts contribute to the gross value of field crops. Groundnuts can be consumed in an

unprocessed state, but they also serve in the economy as raw materials for the manufacturing

of various products such as peanuts, peanut butter, sweets and cooking oil. According to

Staple Food Value Chain Analysis-Zambia Report (2009) by Chemonics International,

Zambia used to be a major supplier of confectionary groundnuts to the World market in the

1960s when the Chalimbana nut was highly desirable. However, the parastatal company that

used to market the commodity became a costly burden on producers and collapsed, the basic

seed became moribund due to lack of a sustained rejuvenating breeding programme, and

gradually consumer tastes turned towards the smaller confectionary nuts produced by South

Africa, which were marketed more aggressively. This resulted into groundnut production

declining considerably as most commercial farmers ceased to produce and small-scale

farmers were not offered the services and rewards associated with successful marketing

arrangements.

Concerned about these declining production levels of the commodity, the Zambian government and other concerned stakeholders over the last decade have tried to revitalise the groundnut industry in the country.

This paper has therefore been prepared to understand the main challenges facing the industry

so that a framework for sustainable development of the groundnut industry in the country

could be proposed. The report describes the various value chain activities and key players in

the groundnut value chain. Some key conclusions and policy recommendations have been

made.

The study relied heavily on existing data from the Ministry of Agriculture and Livestock and

past value chain reports on groundnuts as well as a draft Groundnuts and Common Beans

Intervention Plan by the Smallholder Agribusiness Promotion Programme (SAPP).

The study had its own limitations. Investigations were only centred in Lusaka and to a few

organisations due to limited resources and time. No visitations were made to the productive

regions for groundnuts in the country.

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2. GROUNDNUTS PRODUCTION AND SALES

2.1 Producing Areas Groundnuts are mainly produced in six provinces of Zambia, namely Eastern, Northern,

Southern, Central, Luapula and Muchinga. The contribution of various provinces to Zambia’s

total groundnuts production is depicted in Figure 1 and 2 below.

Table 1: Production by Province during 2012 SeasonArea Planted Production Mt Yield Mt

Zambia 184,397 113,026 0.6Central Province 19,234 12,106 0.6Copperbelt Province 8,735 5,427 0.6Eastern Province 56,946 30,930 0.5Luapula Province 17,599 14,133 0.8Lusaka Province 2,487 1,152 0.5Muchinga Province 14,163 10,817 0.8Northern Province 29,025 16,211 0.6N/Western Province 7,814 10,337 1.3Southern Province 23,089 9,616 0.4Western Province 5,305 2,298 0.4

Figure 1: Area Planted to Groundnuts 2012 Figure 2: Production in Metric Tonnes by Province 2012

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Central11%

Copperbelt5%

Eastern27%

Luapula13%

Lusaka1%

Muchinga10%

Northern14%

N/Western9%

Southern9%

Western2%

Production in Metric Tonnes by Province 2012

2.2 Production Trends Trends in the area planted, production and yields of groundnuts is as depicted in Table 2 and

Figures 3, 4 and 5 below. Zambia is experiencing increasing groundnuts production since

2007. However, production hasn’t increased to desirable levels partly due to the low yields

that have been obtaining in the country. Zambia’s groundnut yields have varied from between

0.3 and 0.6 MT/ha. These variations in groundnut yields are typically related to changes in

soil fertility, farming systems/practices and seed selection.

Groundnuts production in the country is mainly by the smallholder farmers who used

recycled seeds year in year out. The Zambian government and NGO’s, through drought relief

programs had supplied the bulk of groundnut seeds to farmers particularly those in

marginalized areas. However adoption of improved varieties has been extremely low despite

their record high yields over local varieties. Nearly all groundnuts grown in Zambia are

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Central Province10%

Copperbelt Province

5%

Eastern Prov-ince31%

Luapula Province10%

Lusaka Prov-ince1%

Muchinga Province

8%

Northern Province

16%

N/Western Province

4%

Southern Province

13%

Western Province3%

produced from farmer retained seed recycled over several generations, resulting in perpetual

low yield records.

Table 2: Groundnuts: Area planted and total production

Groundnuts 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Area Planted(Hectares)

70,018 137108 129,473 150,460 116,494 161,962 144,251 147,320 144,201 216,126 267,567 448,243 184,397

Production Mt

23,447 57,753 41,421 82,551 69,696 74,218 84,010 55,215 70,527 120,564 163,733 278,775 113,026

Yield Mt 0.33 0.38 0.32 0.55 0.60 0.5 0.6 0.4 0.5 0.6 0.6 0.6 0.6

Figure 3: Area planted to Groundnuts 1987 - 2012

20122010

20082006

20042002

20001998

19961994

19921990

19880

50,000100,000150,000200,000250,000300,000350,000400,000450,000500,000

Area Planted: GROUNDNUTS PRODUCTION IN ZAMBIA IN HECTARES 1987 - 2012

Year

Area

pla

nted

in H

ecta

res

Figure 4: Groundnuts production in Zambia, metric tonnes 1987 – 2012

6

0

50,000

100,000

150,000

200,000

250,000

300,000

GROUNDNUTS PRODUCTION IN ZAMBIA, METRIC TONNES 1987 - 2012

Year

gnut

pro

d in

mt

Figure 5: Groundnuts Yields 1987 - 2012

20122011

20102009

20082007

20062005

20042003

20022001

20001999

19981997

19961995

19941993

19921991

19901989

19881987

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

GROUNDNUTS YIELD PER HECTARE IN METRIC TONNE IN ZAMBIA ,1987 - 2012

Year

Yiel

d pe

r hec

tare

2.3 Groundnuts Marketing

Figure 6 depicts groundnuts sales in the country. The volumes of groundnut sales have been

low in the country over a number of years due to the low production the country has been

recording. As production started rising especially from 2007 onwards, sales also rose

proportional to production reaching highest in 2011 and then having a drastic decline in 2012.

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One important point to note is that the informal supply chain accounts for the major share of

groundnut sales in Zambia and the major players in this group include the smallholder

farmers, the brief case traders; the village based micro processors and the informal cross-

border traders.

Figure 6: Groundnuts Sales in Zambia, Metric Tonnes 1987 – 2012

20122011

20102009

20082007

20062005

20042003

20022001

20001999

19981997

19961995

19941993

19921991

19901989

19881987

0100002000030000400005000060000700008000090000

100000

GROUNDNUTS SALES IN ZAMBIA, METRIC TONNES 1987 - 2012

Year

Sale

s in

mt

3.0 THE STRUCTURE OF ZAMBIA’S GROUNDNUT VALUE CHAIN – STAKEHOLDER ANALYSIS

There are a number of value chain players in the groundnuts value chain. Figure 7 shows a

sketch or structure of the Zambian Groundnuts value chain. The major players in this chain

are summarised below:

Seed companies

Zambia has a number of seed companies (ZAMSEED, MRI, SEEDCO, MONSANTO,

PANNAR Seed, etc who supply seed to smallholder farmers. Most of these companies are

located along the line of rail as such their outreach to the majority of the producers is limited.

In addition, these companies prefer to trade in maize seed which has a big market from the

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government subsidy programme. As a result these companies have invested very little in

groundnuts seed production.

Traders

Traders provide a market to farmers and also act as suppliers to food processors and

exporters. They are sometimes referred to as brief case traders but they play a vital link

between producers and processors. The interest of this group of players is to make quick

money before the smallholder farmers take their groundnut to big markets of big buyers.

However the biggest challenge is that most these traders operate along the line of rail with

easy access and good road infrastructure network leaving out the outlying areas.

Smallholder farmers

Smallholder farmers form the biggest and most important group of stakeholders in the

groundnut value chain. Smallholder farmers either operate in groups or individuals. This

group has very limited seed multiplication capacity and is reluctant to invest in basic seed,

hence their continued use of recycled seed.

Food Processors

This group provides peanut butter, roasted nuts, and oil intermediaries who interface with the

end users who are the consumers. A number of big companies and organizations belong to

this group of players. The majority of them have the capacity to buy the groundnuts from the

traders, value add and export or sale within the country. However, Zambia’s groundnuts

processing industry is fragmented, has inadequate capacity or access to finance. There are no

international recognised groundnuts processors in the country. The processors are interested

in adding value to the groundnuts to produce a number of products such as peanut butter,

salted nuts, paste, oil, seed cake for animal feed and other products. This group is mainly

concerned with aflatoxin.

Supermarkets, Food Service Suppliers, Restaurants, hotels, canteens and bars

These provide a major market for intermediaries and farmers, as they service the needs of the consumers. They are involved in this business for profit.

Exporters/importers

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These are those business entities that export and import the commodity and its finished

products. They are in the business for profit. Currently Zambia has inadequate capacity to be

a player in the main export markets. Limited informal trade has been recorded through

Chipata into Malawi and Mozambique. In addition, limited trade has also been made into

South Africa.

Consumers

Consumers are the end users of the following end market products are: fresh unshelled nuts in

bulk, dry unshelled nuts in bulk, shelled nuts in bulk, packaged unshelled nuts, and processed

shelled nuts with flavourings, peanut butter, oil and cake. Consumers normally are interested

in high quality cheap products. Currently, most Zambian consumers are not aware of the

potential nhealth risks associated with the consumption of aflatoxin infected groundnuts.

Value chain service providers

These comprise of a range of institutions such as seed research institutions, seed

multiplication out-growers, seed companies, input suppliers and non state actors. Their

interest is mainly in improving both production and productivity through research and

extension work. Service providers especially from government departments have been failing

to fulfil the mandate in promoting groundnuts mainly due to human and financial challenges.

Figure 7: Structure of Zambia’s Groundnut Value Chain

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4. OPPORTUNITIES AND CHALLENGES IN THE GROUNDNUTS VALUE CHAIN IN ZAMBIAThere are a number of opportunities and challenges associated with the groundnuts value

chain and these are summarised below:

4.1 Challenges

Production Constraints

Limited crop management skills, inadequate pest, disease and weed control resulting in

low yields and high losses

Poor harvesting, drying and storage skills increase aflatoxin risk

Lack of knowledge and information on markets/market specifications

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Input Suppliers

Producers

Traders/first stage processors

Small scale processors

Peanut ButterManufacturers

OilManufacturers

ConfectioneryProcessors

Importers

Wholesalers

Retailers

Consumers

High labour input during harvest and immediate post harvest

Lack of basic de-shelling equipment

Lack of micro-finance

Farmer malpractices e.g. soak nuts and add foreign bodies to increase weight when

selling

Lack of farmer commodity organisation e.g. soak nuts and add foreign bodies to increase

weight when selling

Lack of a groundnuts commodity association

Input Constraints

Limited information on input usage by farmers

Few input supply points

Lack of basic seed on the market

Use of recycled seed and non-certified seed leading to reduced yields and lowering trust

in seed products

Underdeveloped out-grower networks

Limited interest by seed companies

Limited access to finance

Supply-Processors and Processing & Storage Constraints

Limited premium for higher special nuts

Trader malpractices e.g. inaccurate scales

Supply according to specifications

Erratic supply/inconsistent demand

Lack of selling/marketing facilities

Side selling undermines and limits development of out-grower schemes

Inadequate sorting and grading adds processors costs and limits value addition

Lack of modern processing equipment

Lack of appropriate packaging plants

Limited access to finance by traders

Lack of organised market by farmers and traders

Lack of aflatoxin testing facilities/equipment

Sales and Distribution Constraints

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Cross contamination in storage/logistics chain

Product inconsistency

Aflatoxin

Reliability of supply

High prices/price fluctuations destabilise market

Inconsistence specifications

Inability to access international markets

Little incentives to produce to specifications

Market/Demand Constraints

Unsafe high levels of aflatoxin

Lack of infrastructure to meet international market requirements

Downgraded groundnut/products due to poor practices

Lack of appreciation of standards/grading system

Inadequate use of scales at selling points

Shortage of all grades with demand outstripping supply

4.2. Opportunities

Zambia has favourable climate and good soils which are ideal for growing groundnuts. In

addition there is high demand for groundnuts both internally and on the export market.

Taking advantage of this market could have a substantial impact on the economy of small-

scale farmers involved. The major constraint to accessing this market on a large scale is

control of aflotoxin. Harvesting systems and early access to hygienic shelling capability

together with the use of storage and packaging systems followed by testing with modern

equipment can overcome this constraint and open Zambia’s production to the export market.

The low productivity and poor quality product is a challenge to be addressed through a

breeding programme and extension work by a party with commercial interest in the

successful outcome of such efforts. The commercial incentive will arise from the

establishment of aflotoxin control systems and open access to export markets. This is

dependent upon the business enabling environment and the willingness of investors to

commit themselves to a sustained effort to turn the industry around and regain at least some

of the former status that it enjoyed under private management.

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A risk associated with all export enterprises in Zambia and elsewhere is exchange rate

movements, particularly in the context of an industry in which the majority of the costs of

production are Kwacha based. Many agricultural export sectors have failed due to

appreciation of the Kwacha, which although ostensibly subject to free market forces, is in fact

subject to a large measure of central control that is driven more by the interests of consumers

of imported goods than by exporters.

5. CURRENT RESEARCH

There are currently a lot of support being undertaken in the country on groundnuts to assist in

understanding and resolving the constraints identified. The Smallholder Agribusiness

Promotion Programme (SAPP) Implementation Plan (2012) provides detailed information

with regard to the organisations and programs undertaking support activities in the

groundnuts value chain and this is reproduced in the Table below

Organisation Type of Support engaged in LocationMsekera Research Institute Variety research and support to

seed certificationEastern Province

Misamfu Research Institute Variety research and support to seed certification

Northern Province

Zambia Agriculture Research Institute

Agricultural research and aflatoxin issues

Nationwide

Seed Control and Certification Institute

Seed certification and control Nationwide

Seed companies Possible seed multiplication and distribution

Eastern and Northern Provinces

Profit + Farmer training, household food security, market access and Aflatoxin control

Eastern Province

Farmer Input Support Programme (FISP)

FISP has been extended to cover groundnuts. This will create a major pull for private sector investments in inputs, processing and marketing

Nationwide

Dunavant Groundnuts input supply and marketing. Possible out-grower development

Eastern Province

Cotton Association of Zambia (CAZ)

Farmer mobilisation into growing of groundnuts

MUSIKA Support to out-grower development in groundnuts

Eastern Province

Zambia National Farmers Union

Support to the development of oilseed commodity association

Nationwide

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Organisation Type of Support engaged in Locationwhich includes groundnuts

Indaba Agriculture Policy Research Institute (IAPRI)

Commodity research and policy development and also support to commodity association

Nationwide

World Vision Seed distribution to small scale farmers

Eastern Province

Katopola Agriculture Engineering Services

Manufacturing of groundnuts shellers and lifters

Eastern Province

GIAZ Groundnuts Commodity Association

Nationwide

COMACO Groundnut out-grower and processor

Eastern Province

Jungle Beat Groundnut out-grower and processor

Eastern Province

Kingdom Delicacy Groundnut out-grower and processor

Eastern Province

6. KEY FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

6.1 Key Findings and Conclusions:

The following conclusions may be drawn based on information gathered from the Ministry of

Agriculture and Livestock and from reviewed literature:

1. Zambia has very limited seed multiplication capacity and farmers are reluctant to invest

in basic seed, hence the continued use of recycled seed in the country.

2. The Zambian groundnut industry is riddled with lack of the necessary investments in

groundnut processing. Almost all groundnuts exported from Zambia are in the form of

raw material thus depriving the country of the opportunity to harness the income

generating potential of value adding processes. Developing a strong agro-processing

industry will improve the prospects of the groundnut subsector which has the potential of

creating strong backward and forward linkages in Zambia’s economy.

3. Newly released improved varieties come with special characteristics adapted to specific

enduses. For example some varieties by virtue of their physical (i.e. kernel shape and

size), biological (i.e. high yields, early maturity, disease and pest resistance etc.) and

chemical (i.e. high oil content) characteristics may be suited for specific end uses.

Therefore for Zambians to remain competitive, farmers must be given access to

groundnut varieties which meet the demands of potential export markets

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4. Zambia’s agricultural potential is not being stimulated sufficiently to take advantage of

endowments to create wealth or exploit export opportunities. The cost of production is too

high for competitiveness, partly due to VAT and other charges. Cost and access to finance

is a major constraint to development due to competition from Government and risks

associated with policy changes and exchange rate fluctuations.

5. There is insufficient confidence in the private sector to invest in outgrower schemes for

groundnuts in the country.

6. Delays in enacting the legal framework for agricultural marketing is suppressing the

scope for growth in the free market

6.2 Recommendations:

1. Government through the Ministry of Agriculture and Livestock should put in place a

deliberate programme on seed multiplication and sensitise smallholder farmers on the

benefits of using certified seeds

2. Government should facilitate the development of a strong agro-processing industry to

improve the prospects of the groundnut subsector which has the potential of creating

strong backward and forward linkages in Zambia’s economy.

3. Government and other service providers should undertake more training and

awareness on how to improve the level of post harvest handling of groundnuts

4. There is need for more research in the areas of technology development, transfer and

adoption, value addition, post harvest handling, and farmers institutional

strengthening and change management.

5. For Zambians to remain competitive, farmers must be given access to groundnut

varieties which meet the demands of potential export markets

6. Government should look into the high cost and access to finance

7. There is need for government to encourage out-grower schemes for groundnuts in the

country.

8. Government should enact the draft legal framework for agricultural marketing in the

country

6.3 Key stakeholders for consideration at the national workshop

The following are the possible institutions from which potential participants can be drawn

from to attend the stakeholder workshop in Malawi and also to come up with the research

topics for Zambia on the groundnut value chain.

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1. Zambia National farmers Union

2. Agribusiness Department, Ministry of Agriculture and Livestock

3. Early Warning Unit, Ministry of Agriculture and Livestock

4. Department of Agriculture, Ministry of Agriculture and Livestock

5. Grain Traders Association of Zambia

6. PELUM Zambia

7. University of Zambia

8. Smallholder Agribusiness Promotion Programme

9. FAO

10. FOSUP

11. Seed Control and Certification Institute SCCI

12. Agricultural Consultative Forum ACF

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REFERENCES1. Chemonics International Inc(2009) Staple Foods Value Chain Analysis, Country

Report – Zambia

2. I-Life DAP (2005), Regional Market Overview – Groundnuts

3. Ministry of Agriculture and Livestock, Agriculture Statistics 1987 – 2012

4. Smallholder Agribusiness Promotion Programme (2012), Draft Groundnuts and

Common Beans Intervention Plan

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