Sesame Value Chain AnalysisBeira Agricultural Growth Corridor

Final ReportApril 2013

The Beira Agricultural Growth Corridor

The Beira Agricultural Growth Corridor (BAGC) initiative is a partnership between the Government of Mozambique, private investors, farmer organisations and international agencies. It was launched in 2010 with the goal of promoting increased investment in commercial agriculture and agribusiness in the Beira Corridor (Tete, Sofala and Manica Provinces). The BAGC initiative is designed to boost agricultural productivity and competitiveness through:

Coordinating public and private investments to generate maximize returns; Leveraging existing “anchor” investments in the region (e.g. mining projects and railway lines) to

enhance their impact on the agricultural sector; Developing new infrastructure and agriculture projects as commercially-viable business

opportunities that drive growth and benefit local communities; Supporting the development of sustainable agricultural support services, with a special focus on

production inputs, financial access and extension services; and Improving the business climate for agricultural investors, with a special focus on investment in

small and medium sized farming operations in the Beira Corridor.For more information see: http://www.beiracorridor.com

SNV Netherlands Development Organisation

SNV Netherlands Development Organisation is a non-profit international development organisation headquartered in the Netherlands and with staff in 35 countries. For over 40 years SNV has worked with national, regional and local governments, entrepreneurs and citizen associations to alleviate poverty. SNV’s services are funded by both public and private sources. With over 900 technical advisors and 100 local teams, we provide expertise in agriculture, renewable energy, education, health, water and sanitation, forestry, tourism, governance and private-sector development.For more information see: http://www.snvworld.org/en/sectors/agriculture

Publication Notes

Citation: Mwai J., Ruijten M, et al. 2013. Sesame Value Chain Analyses in the Beira Agricultural Growth Corridor. Av. Julius Nyerere 1339, Maputo, Mozambique: SNV Netherlands Development Organisation.

Corresponding author: Martinus Ruijten (truijten@snvworld.org)

Copyright © 2013 by SNV Netherlands Development Organisation. All rights reserved. Unless otherwise indicated, this report may be reproduced, quoted or cited without permission of the author(s) provided there is proper acknowledgement. The responsibility for the contents of this report remains with the author(s). While our objective is to provide useful, general information, SNV makes no representations or assurances as to the accuracy, completeness, or timeliness of the information. The information is provided without warranty of any kind, express or implied. This publication does not constitute an offer, solicitation, or recommendation for the sale or purchase of any security, product, or service. Information, opinions and views contained in this publication should not be treated as investment, tax or legal advice.

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ABBREVIATIONS AND ACRONYMS

BAGC Beira Agricultural Growth CorridorDPA Direcção Provincial de Agricultura – Provincial Agriculture DirectorateETG Export Trading GroupFAO Food and Agriculture Organisation FEWSNET Famine Early Warning System NetworkGoM Government of MozambiqueGBP Great Britain PoundIIAM Instituto de Investigação Agrária de Moçambique - Mozambique Institute for

Agricultural ResearchMZN New Mozambican MeticalMT Metric TonNRI Natural Resources InstituteReSAKSS Regional Strategic Analysis and Knowledge Support SystemSIMA Sistema de Informação de Mercados Agrícolas de Moçambique – Agricultural Market

Information SystemSPA Serviços Provinciais de Agricultura – Provincial Agricultural ServicesUSD United States DollarVCA Value Chain AnalysisVCD Value Chain Development

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TABLE OF CONTENTS

Executive Summary...............................................................................................................................5

Primary Objectives and Scope of Work.............................................................................................5

Sesame Production in the Beira Corridor..........................................................................................5

The Analysis, Its Methodology and Findings......................................................................................6

First Steps to Designing an Effective Intervention.............................................................................7

1. Objective of the Value Chain Analysis............................................................................................9

2. Scope of the Value Chain Analysis...............................................................................................10

3. Methodology and Approach........................................................................................................10

Team composition...........................................................................................................................10

4. Production and Markets..............................................................................................................11

5. Markets and Margins...................................................................................................................15

6. The Structure of the Mozambican Sesame Sector.......................................................................17

7. Enhancing Farmer Incomes in an Imperfect Market....................................................................21

Ethical Sourcing Certification...........................................................................................................21

Quality Standards and Product Grading..........................................................................................22

Access to Information......................................................................................................................23

8. The Business Climate and the Sesame Value Chain.....................................................................24

9. Strengthening the Sesame Value Chain.......................................................................................25

10. The Application of Successful BAGC Models............................................................................28

11. Comparison of Production Systems.........................................................................................29

12. Conclusions and Recommendations........................................................................................33

Targeting Interventions and Identifying Access Points in the Value Chain......................................33

Prospective Investments in Strengthening the Sesame Value Chain...............................................34

Market Constraints and Imperfect Competition..............................................................................36

Geographic Focus Areas..................................................................................................................36

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EXECUTIVE SUMMARY

Primary Objectives and Scope of Work

Sesame has emerged as one of the key cash crops grown by smallholder farmers in the Central and Northern regions of Mozambique. A relatively new addition to the commercial agricultural sector, sesame cultivation expanded rapidly in the early 2000s. More than 300.000 Mozambican farmers—overwhelmingly smallholders—are currently growing sesame, and 40% of these are located along the Beira Corridor. However, despite its popularity and demonstrated commercial viability, sesame production has stagnated during the past 4 years.

The Beira Agricultural Growth Corridor (BAGC) initiative invited SNV Netherlands Development Organisation to undertake this Value Chain Analysis as the first step to establishing a joint program to mobilise stakeholders in support of the further development of the sesame value chain. The objective of this collaboration will be to establish a Sesame Value Chain Partnership dedicated to enhancing the profitability of the sector by boosting the marginal productivity of sesame farmers in the Beira Corridor and building stronger, more efficient market linkages throughout the value chain. To build a sound analytical foundation for this partnership BAGC and SNV carried out a joint assessment of sesame production in the Beira Corridor, which comprised value-chain mapping, an analysis of market trends and competitiveness, a review of the governance and regulatory climate and the identification of key value-chain constraints.

This study was conducted by a Beira-based team including a consultant and staff from both SNV and BAGC. The team conducted interviews with 26 actors and stakeholders involved in the Beira Corridor sesame industry. The study supplemented its primary data with material from authoritative sources such as the UN Food and Agriculture Organization (FAO) and the Government of Mozambique (GoM).

Sesame Production in the Beira Corridor

The study revealed a number of important dynamics in sesame farming, including the very small scale of sesame production models in the Beira Corridor. The Beira Corridor accounts for 50% of Mozambique’s total number of sesame fields, but only 27% of the total area of sesame cultivation, with an average growing area per farmer of less than half a hectare (0.35ha). Within the Beira Corridor, Sofala Province accounts for almost half of all sesame fields and boasts the largest average field size, making it an ideal entry point for an intervention in the sesame value chain.

FAO data indicate that average sesame productivity has stalled at 660 kilograms/hectare for the past several years, yet sesame yields have the potential to exceed 1,000 kg/ha. In Sofala the largest average yields are in the Caia, Gorongosa, Nhamatanda and Maringue areas. Any prospective value-chain intervention should begin by carefully examining differences in marginal productivity between farmers in these areas and other, less productive regions. Among the best performing areas Nhamatanda ranks first at an average of 800 kg/ha, while the other areas are at or below 570kg/ha; Caia and Gorongosa have the lowest per hectare productivity in Sofala Province. The apparent

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underperformance of sesame production in these areas suggests that Caia and Gorongosa would be prime candidates for a value-chain intervention.

Sesame farmers in Mozambique sell their produce to local traders, who in turn sell to large exporters; sesame exports are primarily shipped to processors in Turkey, India and China at a about USD 1.100/tonne.1 Prices for finished sesame products are far higher: for example, less than 15% of the consumer retail price for sesame oil typically goes to the sesame producer. Study interviews suggest that premium export prices could reach as much as USD 1.200/tonne for sesame oil, 1.400 for sesame paste (tahini) and more than 2.800 for high-quality white confectionary sesame2. Farmers would be able to earn a minimum price of 1,190 for conventional and 1,300 for organic Fairtrade-certified sesame; however, farmers would need to make substantial investments in order to be certified as Fairtrade or Organic producers.

Within Mozambique, the commercial sesame market exhibits a high degree of buyer concentration: a very small group of export firms purchase sesame from a far larger number of producers, many of whom are smallholder farmers. Although they appear to compete with each other in purchasing sesame there is evidence of explicit coordination between exporting firms, which often serve the same destination markets and sell to one another in order to complete orders or fill shipping containers. This type of coordination is not present at the producer level, and imbalances in market power between buyers and sellers appear to be constraining the competitiveness and efficiency of the sesame value chain, though more extensive microeconomic analysis would be required to fully assess these dynamics. The domestic sesame market also appear to suffer from a number of structural imperfections common to agricultural markets in rural Africa, including a purchasing system based on spot transactions conducted by small-scale traders (who are often agents of export firms), which further limits price competition and may distort incentives on the part of buyers, sellers, or both.

The Analysis, Its Methodology and Findings

In order to better understand the opportunities and constraints facing sesame farmers the study team analysed four alternative interventions for boosting sesame production in the Beira Corridor. Improved production models based on these interventions yield projected investment returns ranging from 11% to 52%. Expanding the use of improved seed appears to offer the single highest return to producers, yet this strategy does little to limit producers’ exposure to serious downside risks, particularly their dependence on rainfall. In order to both increase yields and mitigate weather-related vulnerability the study recommends a combination of expanded access to improved seed and irrigation, which is projected to generate a 38% increase in per-hectare productivity.

The study also yielded several additional findings regarding sesame production. Interviews with farmers and district agricultural officers revealed that the majority of crop losses were caused by a combination of rain dependency and inefficient seed-planting techniques, which were exacerbated by endemic diseases and pests. Furthermore, sesame producers typically operate on a three-year

1 This is the “Free on Board” (FOB) price at the Port of Beira, essentially the final price point for sesame exports in Mozambique.2 FOB Beira price for sesame seed equivalent

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field cycle, in which the farmers open new land to cultivation and enjoy a relatively large yield in the first year, followed by declining returns in years two and three, are then forced to abandon the field after the third year.

However, the sesame value chain is not confined to production, and post-harvest handing and marketing also represent important avenues for enhancing its income-generating impact. The study found that a lack of quality standards and product differentiation, pervasive information asymmetry, the absence of strong producer associations to balance the market power of large buyers all contribute to lowering the returns received by farmers. For example, it is often difficult for purchasers to verify the quality of the sesame available to them, and as a result, they are unable to offer a premium for it. The establishment of clear quality standards and reliable verification processes would promote transparency in the supply chain, generating incentives for farmers to invest in increasing the value of their produce. Access to several different grades of sesame would also benefit purchasers and exporters, enabling them to diversify their product lines and range of potential clients.

First Steps to Designing an Effective Intervention

Improving the sesame value chain in the Beira Corridor will require identifying potential partners among processors/ exporters and existing farmer organisations, as well as building these organisations where none currently exists. The presence of strong producer groups capable of collective marketing will allow the establishment of direct linkages to exporters and input dealers, eliminating the distortions caused by the trader system, and the development of embedded downstream services to producers by the buyers. Organizing sesame farmers will facilitate training in improved farming techniques, as well as the disbursement of improved seeds and other inputs and the development, rehabilitation and expansion of irrigation systems. Strong producer associations will also be critical to formulating long-term agreements between buyers and sellers, enabling them to fix reliable quality standards and establish prices that reflect that quality. The provision of extension and inputs services could be done in various ways: through pre-financed contract arrangements between producers and processors, through outgrower schemes of smallholders around a nucleus commercial farm or by independent smaller companies and credit provision to farmer associations or cooperatives. The first two options seem most feasible for the near future.

Based on the study’s findings Sofala Province provides the most promising opportunity available for a prospective intervention in the sesame value chain, as it accounts for 50% of both the cultivated area and production volume of sesame within the Beira Corridor. Within Sofala the intervention’s focus should be on the districts of Caia, Gorongosa and Nhamatanda, which appear to have the greatest potential for productivity growth. Within Caia the Murraca area would be compatible with the logistical demands of a large-scale agricultural intervention, while in Gorongosa the Nhalirose area would serve as a suitable base of operations. In Nhamatanda consideration should be given to the Metuchira Pita, Tica and Muda areas, each of which offers unique advantages and drawbacks. The study estimates the combined number of sesame fields in all three districts at 42,000, for a total cultivated area of 21,000 hectares. Based on the limited available data, in Sofala Province an estimated 330 hectares of sesame is cultivated by farmers’ associations with access to irrigation systems; these associations would serve as a core group that the intervention would seek to expand

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upon. The proposed intervention would begin by mobilizing interested private sector partners for interventions, establishing business and operational plans. These would include reliable baseline values for marginal productivity, total productivity, and farm-gate prices in the targeted area, as well as the skill level of local farmers, the availability of arable land, access to investment credit, and other factors that may affect the final evaluation of the intervention’s achievements and their potential reproducibility in other areas.

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1. OBJECTIVE OF THE VALUE CHAIN ANALYSIS

Sesame has recently emerged as an important cash crop for smallholder farmers in the Central and Northern regions of Mozambique. Although cultivation increased significantly following its commercial introduction in the early 2000s, total production has stagnated over the past 4 years. This appears to be due to a combination of agronomic challenges, including the limited use of improved seeds and irrigation systems, and market imperfections in the sesame value chain, especially anticompetitive distortions arising from the concentrated structure of the sesame purchaser/exporter market.

Despite its demonstrated commercial potential sesame remains largely a smallholder crop. More than 300,000 farmers are growing sesame throughout the country, of which 40% are located in the centre of Mozambique along the Beira Corridor; yet the average Mozambican sesame field is less than one hectare, and in the Beira Corridor the average field size is less than ½ hectare. The potential yield per hectare is up to a metric ton for rain-fed cultivation (with proper management and fertilisation), but actual yields are less than 400 kg due to poor agronomic techniques and the limited use of improved inputs.

Market opportunities for Mozambican sesame are abundant. Effectively differentiating sesame according to its quality and oil content would yield immediate benefits; at present most Mozambican sesame is a mix of different seed types and quality levels, and the result is a relatively low homogenous grade unsuitable for high-value products like confectionary sesame. Reliable differentiation by type and quality would allow producers to receive price premiums for high-value produce, reinforcing their incentives to invest in superior seed varieties and utilize conscientious harvest and post-harvest handling techniques.

Even in the absence of product differentiation, straightforward increases in production could enable a domestic sesame cleaning, processing and pressing industry to become viable. Nearly all Mozambican sesame is currently exported raw to Asia and the Middle East, where it is processed along with local and other imported sesame into finished products. Increased production volume would create economies of scale, allowing cleaned and de-hulled sesame seeds or sesame oil to be exported directly to consumer markets in Europe. Mozambique also has the opportunity to build origin-identity to satisfy niche markets for certified organic and Fairtrade sesame.

The Government’s Strategic Plan for the Agriculture Sector (Plano Estratégico para o Desenvolvimento do Sector Agrário—PEDSA) identifies the development of the Beira Corridor as a potential catalyst to drive growth in the agricultural sector, and is pursuing a series of initiatives designed to attract increased investment. The Beira Corridor was selected for its huge production potential for both food crops and cash crops, as well as livestock, agroforestry and fisheries. Its location also makes it well suited to denser integration with domestic, regional and international markets.

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Increased support for the sesame value chain presents new and expanded opportunities for private-sector operators within the chain, as well as the potential to greatly increase incomes among Beria Corridor sesame farmers.

2. SCOPE OF THE VALUE CHAIN ANALYSIS

The Terms of Reference (TOR, attached as Annex A of this report) describes the activities that were carried out as part of this Analysis of the Sesame Value Chain in the Beira Corridor. The study encompassed producers, marketers and other actors in the three provinces of Sofala, Manica and Tete, which are situated around the primary road and rail infrastructure linking the inland agricultural regions to international markets via the Port of Beira.

BAGC and SNV carried out the joint analysis of the sesame value chain in the Beira Corridor. This document is the final report of that analysis. It is divided into four sections:

1. Value-Chain Mapping and Key-Actor Networks : The analysis begins by identifying the primary and supporting actors in the sesame value chain, describing their roles and relationships, and mapping their economic interactions;

2. Market Trends & Competitiveness : it then proceeds to assess market dynamics and trends, with a focus on unmet demand, growth opportunities, and the position of Beira Corridor sesame producers in the international sesame trade;

3. Governance : the analysis continues with an assessment of the public sector’s role in the value chain, as well as that of NGOs, bilateral and multilateral agencies, with a particular focus on identifying potential partners in the development of sesame production and marketing;

4. Value Chain Constraints : finally, the analysis concludes by highlighting the major constraints to value-chain development, including a risk assessment, and present strategies for overcoming these challenges.

3. METHODOLOGY AND APPROACH

The field study took place between the 6th and 16th of November, 2012. Its analytical methodology involved: A survey of the available literature, documentation and statistics related to the sesame

production and marketing, as well as contextual information on the Beira Corridor; A series of interviews with key actors in the sector, including sesame farmers, private firms,

donor representatives, government agents, and other stakeholders; Cross-referencing quantitative data from multiple sources, and validating findings with relevant

authorities;

Team compositionThe Sesame Value Chain Analysis was carried out by a joint BAGC/SNV team consisting of the following members:

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Name Title OrganisationJames Mwai Consultant Competitiveness Consultant AnastácioTamele Agribusiness Coordinator BAGCNair Abichande Agribusiness Officer BAGCMartinus Ruijten Senior Agribusiness Advisor SNVCintia Portraite Agriculture Advisor SNV

The team interviewed 26 key actors in the sesame value chain; most were conducted face-to-face, though telephone interviews were used in some cases. The team structured its interviews around a common set of questions based on a UNIDO framework for value-chain development, asking additional and follow-up questions as necessary.

The study ream also collected statistical information from authoritative sources such as the UN Food and Agriculture Organization (FAO) and the offices of the Mozambican Government’s Provincial Agriculture Directorate (Direcção Provincial de Agricultura –DPA).

This report will be shared with a multi-stakeholder forum for review and feedback.

4. PRODUCTION AND MARKETS

Sesame is highly sensitive to weather conditions, both during production and post-harvest handling, and as a result sesame production tends to vary significantly from year to year. Sesame farmers’ general lack of access to irrigation accentuates the crop’s vulnerability to drought, while excessive rainfall, especially during or immediately after the harvest, can cause enormous spoilage losses. Nevertheless, sesame production in Mozambique has greatly increased—annual variability notwithstanding—with the total volume of sesame more than quadrupling between 2003 and 2010, supported by buying companies and development actors. Sesame prices also rose steadily during the same period, which likely contributed to the rapid increase in production.

Table 1 Mozambique: Sesame Export Quantity, Export Value, and Value per Tonne, 2003-2010

Year 2003 2004 2005 2006 2007 2008 2009 2010

Volume (MT) 5,281 12,582 11,755 8,166 19,653 25,793 39,436 22,676Value (USD, thousands) 3,268 9,005 8,303 5,788 15,793 38,233 45,151 26,929Value per Tonne 0.619 0.716 0.706 0.709 0.804 1.482 1.145 1.188

Source: Volume and Value from FAOSTAT, accesses November 2012. Cost per tonne calculated figure.

However, it is important to note that the increase in total sesame production was solely driven by expanded cultivation, with marginal productivity remaining essentially unchanged during the period.

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Table 2 Mozambique: Sesame Production, Area Harvested and Average Yield 2005-2010

Year 2005 2006 2007 2008 2009 2010Area Harvested Ha 22,000 20,000 35,000 45,000 65,000 69,500Production Tonnes 15,000 12,000 23,000 30,000 43,000 46,000Yield Yield/Ha 0.6818 0.6000 0.6571 0.6667 0.6615 0.6619

Source: FAOSTAT accessed November 2012

The average yield per hectare in Mozambique has stalled at around 660kg, yet international experience suggests that Mozambique is capable of per-hectare yields in excess of 1.000kg. Moreover, it is important to note that these figures obscure considerable variations between individual producers and between averages for different regions. Yields in the Beira Corridor, for example, are significantly below the national average. While this is due to a number of factors discussed in detail in this report, the major causes appear to be the relatively unfavourable weather conditions observed in the last several seasons and a general increase in the incidence of destructive pests. There are also indications that the scale of cultivation has an impact on marginal productivity.

Table 3 Beira Corridor: Number of Sesame Fields and Total Cultivated Area, by Province

PROVINCE NUMBER OF FIELDS AREA (Ha) AVG AREA PER FIELD (Ha)Zambezia 22,066 6,570 0.30Tete 18,541 5,705 0.31Manica 36,280 12,747 0.35Sofala 69,780 26,785 0.38

Regional Subtotal 146,667 51,807 0.35National Total 291,563 194,171

Source: CAP2010

Due to the smaller scale of sesame production practiced by farmers in the Beira Corridor, the region accounts for 50% of Mozambique’s total number of sesame fields but only 27% of the total area under cultivation, with an average field size of just over 1/3 hectare. Within the Corridor, Sofala Province has both the most sesame fields (almost half of all fields in the Corridor) and the largest average field size. The importance of sesame production in Sofala suggests that the province may serve as an ideal entry point for high-impact interventions in the sesame value chain.

Table 4 Sofala Province: Area under Cultivation and Total Sesame Production by District

District Area (ha) Production (MT)2007/08 2008/09 2009/10 2010/11 2007/08 2008/09 2009/1

02010/11

Beira 382 229 Buzi 894 894 973 1,578 644 644 1,578 1,262Caia 6,136 6,136 6,350 8,583 4,418 4,418 8,466 4,892Chemba 710 710 970 1,249 511 511 679 3,591Cheringoma 1,029 1,029 1,963 1,251 741 741 1,570 1,126Chibabava 1,261 1,261 1,832 2,107 908 908 1,466 2,107

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Dondo 446 446 697 697 321 321 418 418Gorongosa 4,994 4,994 7,800 7,800 3,596 3,596 6,240 4,228Machanga 129 129 120 283 93 93 60 113Maringue 2,551 2,551 2,838 5,130 1,837 1,837 2,189 3,591Marromeu 902 902 1,407 1,411 649 649 914 917Muanza 85 85 120 145 61 61 36 44Nhamatanda

650 3,121 4,348 5,401 2,247 2,247 2,174 4,321

Source: DPA

Table 5 Sofala Province: Average Yields per District

District Yield (Ton/Ha) District Yield (Ton/Ha)Chemba 2.875 Marromeu 0.650Chibabava 1.000 Dondo 0.600Cheringoma 0.900 Caia 0.570Nhamatanda 0.800 Gorongosa 0.542Buzi 0.800 Machanga 0.400Maringue 0.700 Muanza 0.300

Source: Study calculations

Within Sofala Province it would appear from the data that Chemba District achieves the highest per-hectare yield, though at nearly three times the industry average and more than four times the Mozambican national average (i.e. 2.875ton/ha v. 1.000 and 660ton/ha, respectively) this is almost certainly the result of a measurement or statistical error. Nevertheless, further study of sesame production conditions in Chemba may be warranted.

The districts with the highest sesame-production growth rates are Caia, Gorongosa, Nhamatanda and Maringue. The evident interest shown by farmers in expanding sesame production would make these districts them a prime target for value-chain interventions. Nhamatanda District has reached a marginal yield of 800ton/ha with Maringue close behind at 700, both of which are above the national average of 660; meanwhile Caia and Gorongosa are at 570 and 542ton/ha, respectively. It would therefore appear that Caia and Gorongosa offer the greatest opportunity for boosting productivity through improvements in the value chain, though all four districts are well-suited to sesame-development interventions.

Access to irrigation systems is critical to increasing yields and mitigating vulnerability to weather-related shocks. There are a number of producer associations in these four districts with irrigation systems, though many are not currently operational. Establishing partnerships with these associations could serve as a point of entry for interventions in the sesame value chain, allowing for contracting and service provision to neighbouring commercial nucleus farms in line with the BAGC spoke and hub model.

Table 6 Data on Associations with Irrigation Networks in Sofala Province

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Districts Name of Association Locality Total Land Area (ha)

Current StatusOperational Non

Operational

Caia Associação de Murraça Murraça 3 XProdutores de Murraça Murraça 80 XAssociação de Licoma Sena 3 XAssociação de Sumbureiro

Vila sede 3 X

Associação de Caia Vila sede 2 XUtumbeNdiPhaza Murraça 1.5 XCupezanaMpiadidi Murraça 1.5 XTchitukuko Murraça 1.5 X

Gorongosa Associação de Nhabirira

Canda 60 X

Produtores de Nhalirose

Nhalirose 10 X

Produtores de Piro Piro 2 XProdutores de Tsiquiri Tsiquiri 6 XAssociação de Nhauranga

Vundúzi 7.5 X

Maríngue Produtores de Kunduve Kunduve 2 XProdutores de Súbue Súbue 5 XProdutores de Samater Samater 2 XAssociação de Samater Samater 4

Nhamatanda Associação Agrícola Metuchira Pita

5 X

Associação Agro-pecuária

Metuchira Pita

5 X

Associação de Metuchira Pita 2

Metuchira Pita 2

15 X

Associação PiaManguana

Tica 40 X

Associação de MudaMassequesse

Muda 35 X

Associação de Macaraúle

Macaraúle 25 X

Associação de Bebedo Bebedo 20 XSource: BAGC

Table 7 Organisations Directly or Indirectly Supporting Irrigation in Sofala Province

Organisation DescriptionDPA Provincial Agriculture Directorate, the Government’s primary agricultural

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research and extension service providerOIIL Local-Initiative-Based Investment Budget, a Government investment fund for

local development projects. The name has recently been changed to the District Development Fund. Since 2006, every district receives an annual allocation of approximately MZN 7 million

GIZ German Society for International Cooperation (former GTZ), a private firm specializing in technical assistance; GIZ activities in Mozambique include rural development and private-sector development initiatives, among other programming

MINAG Ministry of Agriculture, the line ministry tasked with executing the Government’s national agricultural development strategy

SAVE Save the Children, a major international NGO focused on child protection and human development

INGC National Institute for Disaster Management, a Government agency whose mandate includes the prevention and mitigation if droughts, floods and other agriculture-related natural disasters

ProIRRI The World Bank-supported Sustainable Irrigation Development Project, designed to increase agricultural production and raise farm productivity through new or improved irrigation schemes in the Provinces of Sofala, Manica and Zambezia

PIDA The Programme for Infrastructure Development in Africa, its projects in Mozambique include rehabilitating roads and railways in the Beira Corridor and expanding the capacity of the port of Beira

AfDB African Development Bank, a major multilateral agency providing loans and direct programming throughout Africa, including multiple on-going operations in Mozambique

ABIODES Biological Agriculture, Biodiversity and Sustainable Development, a Mozambican non-profit association dedicated to responsible agricultural development and sound environmental management

Source: BAGC

As described in Table 7, above, there are numerous organizations engaged in supporting the rehabilitation of non-operational irrigation systems, as well as expanding existing infrastructure and building the capacity of local associations to manage their irrigation systems. The operation most directly relevant to the proposed BAGC-SNV partnership is the World Bank’s ProIRRI project, which is already underway in Caia, Nhamatanda and Gorongosa Districts.

5. MARKETS AND MARGINS

Mozambique exports nearly half of its sesame to Turkey,3 which applies an ad valorem tariff of 23.40%. Mozambique’s secondary export markets are India, China and Japan. However, trade data 3 Sesame exports to Turkey account for almost 6 million tonnes out of 13.5 million tonnes in total exports.

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are incomplete, and a full breakdown of export volumes to all major destinations is currently being compiled using shipping records from the Port of Beira.

Current export prices for Mozambican sesame are about USD 1.100/tonne to destination markets in India, Bangladesh and China. These countries are themselves large-scale sesame producers, and Mozambican imports feed into their production chains. Their primary finished product, both for domestic consumption and export, is sesame oil.

Table 8 Global Markets: Sesame-Oil Exports from Selected Countries

Country Min. Order Purity Packaging Extraction Type USD/Tonne

Bangladesh 100 tonnes 99% 190 kg steel drums used

Crude 1,850 - 2200

India 1 tonne n/a 5 kg plastic containers

Cold press 2,300 – 2,500

China 5 tonnes 100% Plastic containers Roasted 4,600 – 5,000

Source: Alibaba website, accessed November 2012

Retail prices for conventional sesame oil in developed countries are often as high as USD 10 per litre, and may reach twice that for organic sesame oil. This means that as little as 15% of final sesame-oil price accrues to the sesame farmer.

Table 9 Global Markets: The Evolution of Prices along the Sesame-Oil Value Chain

Producer (Seed)

Trader (Seed)

Exporter from Beira (Seed)

India Re-Export (Oil)

Europe/US Supermarket (Oil)

Price (USD/Kg) 0.73 0.83 1.10 1.15 5.06Percentage of End Value 15 16 22 23 100

Source: Study based on UK supermarkets and India export prices

Export prices could reach USD 1.200-1.400/tonne for seed suitable for making high-quality sesame oil or sesame paste (tahini) and could even exceed USD 2.300/tonne for white confectionary sesame. International certification systems may offer even higher premiums.

Table 10 Fairtrade Minimum FOB Price and Premium for Sesame (USD/MT)

Product Variety Fairtrade Minimum Price Fairtrade Premium4

Organic 1.300/tonne 220Conventional 1.190/tonne 220

Source: FLO Website, accessed November 2012

4 The Fairtrade premium is a sum of money paid on top of the agreed Fairtrade price for investment in social, environmental or economic development projects, decided upon democratically by producers within the farmers’ organisation or by workers on a plantation.

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Fairtrade certification offers premium advantages, but producer associations would be required to make substantial initial investments in the certification process. The cost of Fairtrade certification could be as much as USD 5,000 per producer organisation. There are, however, a number of funding models available to cover the start-up cost of certification, including both commercial investments and grant mechanisms.

Among this study’s major findings is that sesame from Mozambique is critically lacking in product differentiation—it possesses no specific characteristics that would allow it command a quality premium or serve a niche market. Mozambican sesame is consequently treated as a general bulk commodity and exported to India, China and elsewhere to be mixed with other undifferentiated, low-grade sesame from around the world and processed into relatively inexpensive finished products. Because Mozambican sesame is essentially indistinguishable from other types of raw sesame, Mozambican exporters are price-takers, who must accept whatever price the global sesame market is currently offering and cannot charge a quality premium or diversify into niche markets. Organic and Fairtrade certification are among the ways in which Mozambican producers can establish a product identity and build a reputation for quality. However, in order to do so they must overcome a number of obstacles arising from market imperfections in Mozambique’s domestic sesame value chain.

6. THE STRUCTURE OF THE MOZAMBICAN SESAME SECTOR

Mozambique’s sesame sector is characterized by a number of structural constraints that limit its competitiveness and diminish its efficiency. As noted above, sesame is overwhelmingly a smallholder crop, and as a result the market is populated by a vast number of small-scale producers. However, due to the large start-up and sunk costs of sesame warehousing, processing and export, which arise from inherent economies of scale and indivisibilities in production, the market is dominated by a few large commercial buyers. Moreover, there are considerable physical distances between sesame producers, with the sesame growing region of the Beira Corridor alone spanning many hundreds of square kilometres, and these distances are exacerbated by poor quality transportation infrastructure and a weak market-information network. As a result, sesame buyers tend to enjoy very limited competition in any given area, in some cases verging on regional monopsony.5

Because only a small group of commercial buyers operates in any given area—and given the relatively low capacity of regulatory authorities tasked with policing anticompetitive practices—sesame-purchasing firms exhibit a high degree of explicit coordination and power asymmetry. And

5 A “monopsony” is an uncompetitive market in which there is a single buyer of a good or service and multiple sellers of that good or service, the converse of the more familiar “monopoly” (one seller, many buyers). Whereas the costs of a monopoly are borne primarily by buyers, in the form of higher prices, the costs of a monopsony are borne primarily by sellers, who are effectively held “captive” by the single buyer and forced to either accept whatever price the single buyer is offering, or exit the market. The single buyer (the “monopsonist”) therefore offers the lowest price the sellers are willing tolerate, which in cases where sellers face substantial fixed as well as variable costs may even be below full cost recovery, potentially draining the sellers’ capital stock over time. Monopsonies are not as thoroughly studied as monopolies, in part because in advanced economies sophisticated transportation and information networks tend to make them infeasible; however, there is evidence that they are far more common in developing economies, and especially in rural areas. For a more thorough discussion of these issues see: “Competition and Regulation in Agriculture: Monopsony Buying and Joint Selling”, OECD Policy Roundtables, 2004.

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although they ostensibly compete in purchasing seed, there is evidence that sesame purchasers serve the same export markets and may even buy stock from each other in order to complete orders or fill shipping containers. Such coordination is not present at the producer level; and although the market power of sesame purchasers could be offset by producer cooperatives, currently these organizations are relatively weak, where they exist at all, and often have difficulty effectively coordinating action by their numerous constituent farmers. Buyers also enjoy asymmetrical power in terms of market information: these firms are aware of regional differences in sesame prices within Mozambique as well as prevailing prices in export markets. Producers, by contrast, tend to have very limited information on conditions outside their own immediate local market. Finally, sesame exporters frequently employ their own agents as local purchasers, enabling them to vertically integrate almost all of the domestic value chain.

Figure 1 Mozambique’s Sesame Market in International Perspective: Five Value-Chain Types

Source: The Governance of Global Value Chains, Review of International Political Economy.

Due to these conditions the Mozambican sesame market is most similar to the “Captive” model diagrammed in Figure 1, above. In any given regional market a leading firm invests in securing its control over the supply of sesame from the local farmers, which may include explicit or implied non-competition agreements with other buyers.6 In the absence of effective action by government regulators to break up local monopsonies, or strong producer associations to counter their market power, suppliers may be forced to accept whatever price the lead firm is offering. Because the lead firm is aware of its market power it has a strong incentive to offer the lowest price possible that will

6 Non-competition agreements are a form of cartelization in which firms agree to effectively cede control of different market segments to one another; each firm then exercises an effective monopoly (or monopsony) over its allotted segment. This type of agreement need not entail an actual written or verbal contract between firms, and can be accomplished simply by establishing informal norms about what market segments “belong” to which firms.

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not drive its suppliers out of the market, thereby enabling sesame purchasers to capture the maximum surplus from sesame farmers.

In addition, many Mozambican exporters (and, by extension, many domestic purchasers and commercial traders) are actually branches of much larger international firms. These firms have enormous advantages over local sesame producers, as well as their Mozambican purchasing competitors, especially in terms of investment capital. In Mozambique, interest rates on domestic commercial loans (in MZN) are currently at around 20-25% annually, while interest on microloans is typically around 3-3.5% per month. Collateral requirements are also very high by global standards and inefficient or unreliable definition and adjudication of property rights leaves many prospective borrowers unable to use their assets as collateral. International firms typically face much lower borrowing costs and less stringent collateral requirements in more sophisticated and well-capitalised credit markets abroad. They also may possess considerable internal resources to finance investments. By leveraging their capital to invest in relatively large-scale purchasing, processing and warehousing facilities and export operations, international firms are able to aggressively assert their control over local markets, with credit constraints helping to shield them from local competitors.

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Figure 2 The Beira Agricultural Corridor: Diagram of the Sesame Value Chain

CONSUMER PRODUCTS

BUYER MARKETS

EXPORTERS

TRADERS

PRODUCTION ZONES

INPUT SUPPLIERS

Source: Study findings

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Oil Paste Confectionary Others

India China Turkey Middle

East

Japan Others

ETG

Indo Africa OLAM Others

Contract and Other Traders

Zambezia 13%

Sofala 51%

Tete 11%

Manica 24%

Seed Multiplication

IIAM

Retained Grain

Agro Input DealersSPA Exporters

Tools and Equipment

Pesticides and

Fertilisers

7. ENHANCING FARMER INCOMES IN AN IMPERFECT MARKET

The problems affecting the Mozambican sesame market are systemic—the product of structural constraints that bind a very large group of small-scale sellers to a very small group of large-scale buyers—and as a result they cannot easily be addressed or resolved. However, they can be circumvented. There are a number of promising strategies for improving the incomes of sesame farmers in the Beira Corridor, and each comes with its own advantages and drawbacks. Each of these approaches requires strengthening farmer organizations, including production cooperatives and collective marketing groups, as a first step to increasing total sesame production, improving the quality of sesame produced, and enhancing the livelihoods of sesame farmers in the Beira Corridor.

Ethical Sourcing Certification

One way for smallholder sesame farmers to overcome the constraints they face in the domestic market would be to establish direct contracts with ethical-sourcing firms, including certified-organic and Fairtrade-label brands. Ethical-sourcing certification ensures that farmers receive an above-market premium for their produce and many ethical-sourcing systems reward socially, economically and environmentally sustainable practices. However, as noted above, both Fairtrade and organic certification would require substantial investments in the capacity of producer organisations.

Ethical sourcing requires that the certifying agency be able to verify that its producer groups conform to appropriate standards in terms of their production methods, labour practices and quality controls. This in turn requires well-organized producer groups that can (i) credibly demonstrate that they represent a sufficient number of farmers to meet the certifying agency’s minimum scale of production; (ii) manage the initial negotiations with the agency in a timely and responsive manner; (iii) ensure that the organization’s constituent farmers modify their practices to meet any applicable standards of that agency; and (iv) guarantee that those standards are maintained over time.

Ethical-sourcing certification involves a considerable degree of administrative capacity on the part of producer organizations. For many of these groups building that capacity could be accomplished through a phased approach, with initial investments designed to increase productivity and quality for the conventional market before upgrading to ethical-sourcing markets. Negotiating direct contracts with conventional export firms could serve as a stepping stone in this process.

Producer organizations can boost incomes for their constituent farmers by signing advance contracts for fixed amounts of sesame at an agreed upon price. This helps both buyers and sellers to obviate the inefficient trader system, in which they rely on small-scale intermediaries (traders) to link them together. For sesame farmers the benefit is higher prices that can be established in advance, boosting their revenue and reducing the time cost and uncertainty involved in marketing their produce. For the purchaser contract farming can be a way of guaranteeing a predictable supply of produce and/or ensuring a minimum level of quality. It can also be a way for smaller exporters to enter a market dominated by a few large firms. The organizational-capacity demands of contract farming are generally lower than for ethical-sourcing certification, though they require similar forms

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of producer coordination, which allows these arrangements to serve as stepping stones to more sophisticated forms of collective marketing. There is an existing example of this working with SNV in Nampula. Initial exploratory discussions with an exporting firm suggest that there is private-sector interest in pursuing contract farming arrangements based on transparent pricing systems. These arrangements can also be modified to include investments in improved inputs and agronomy training, allowing contracted farmers to increase their productivity and the quality of their produce over time.

Quality Standards and Product Grading

Another way to improve quality and efficiency throughout the value chain is to establish common standards of product quality and evaluation criteria. At present there are no generally agreed-upon, widely published standards for sesame quality. Interviews with export firms indicate that there are informal standards of quality for sesame oil and the cleanliness of sesame for export, but these are not backed by any industry association or national agency.

India is among the world’s leading sesame producers, processors, importers and exporters. India’s standards for agricultural product quality are set forth in the AGMARK certification system. AGMARK standards are established by the Government’s Directorate of Marketing and Inspection and legally enforced by The Agricultural Produce (Grading and Marketing) Act. Although the Government of Mozambique has not yet set forth a similar set of standards for sesame, public agencies may consider using the AGMARK criteria for reference.

Table 11 AGMARK Criteria for Sesame Quality

Grade Designation

Definition of QualityA) Special Characteristics7

Foreign matter (% by weight, maximum)

Immature, shrivelled and dead seeds (% by weight, maximum)

Damaged, discoloured seeds (% by weight, maximum)

Total impurities (total of column 2-4), % by weight maximum

Admixture of other varieties/ types (% by weight , maximum)

Moisture content (% by weight, maximum)

Special 0.5 1.0 Nil 1.5 5.0 5.0Good 1.0 2.0 1.0 3.0 10.0 6.0General 2.0 3.0 2.0 5.0 15.0 7.0

B) General CharacteristicsSesame seeds must be obtained from the plant SesamumindicumlinnSya, family Pedaliaceae

Sesame must be free from fungus and insect attack, live insects, obnoxious smell, rodent contamination, excreta, non-edible oil seeds, artificial coloration and all other impurities

7 Definitions: Foreign matter: dust, lumps of earth, dirt, stones, stems, straw or any other impurity and/or any other edible/non edible seeds. Damaged and discoloured seeds: seeds that are materially or internally damaged or discoloured materially affecting the quality. Immature shriveled and dead seeds: seeds which are imperfectly developed or shrunken. Dead seeds are those seeds which are duds and can be easily crushed by finger. Admixture of other types/varieties: brown/black and other coloured sesame seeds present in white sesame and vice versa

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except to the extent specified.Source: www.agriexchange.apeda.gov.in accessed November 2012

The establishment of similar standard in Mozambique would promote transparency within the sesame supply chain and create incentives for both producers and exporters to invest in the quality of their produce. Clear grading guidelines would allow buyers to offer price premiums for sesame that met basic quality standards, while lowering costs for processors and exporters, who would suffer fewer losses from poor-quality produce; basic grading guidelines could serve as the basis for further value-chain upgrading, including a warehouse receipt system, and would represent an important step toward building Mozambique’s reputation as a high-quality sesame supplier.

The establishment of these guidelines would be best accomplished by a relevant government agency, such as the Ministry of Agriculture and Rural Development or the Ministry of Industry and Commerce. However, industry leaders themselves can take the lead by promulgating a set of quality standards in concert with farmer associations. The participation of farmer associations is imperative, as technical constraints make quality testing infeasible at the individual farmer/trader level. Farmer association capable of bulking, grading, and collectively marketing sesame are crucial to improving the quality of sesame produced by the Beira Corridor value chain.

Access to Information

Farmer associations also have an important role to play in expending access to market information. Many sesame farmers currently suffer from a serious lack of information about prices and demand conditions outside of their own immediate local market; as a result, they are unable to compare prices and determine a marketing strategy that maximizes their profit margin, and instead often sell their produce to whoever is buying locally at whatever price is being offered.

Information infrastructure in Mozambique has expanded rapidly in recent years. Cellular phone subscribers have increased from a negligible share of the population in 2000 to roughly a third in 2011; internet access has expanded more slowly, but steadily, rising from 0.1% in 2000 to 4.3% in 2011.8 Yet access often remains inadequate, especially in rural areas. Farmer associations can serve as key focal points for collecting and disseminating regularly updated information on regional and international markets, enhancing the efficiency of the value chain by easing the truncations and excessive transaction costs imposed by limited market information and ensuring that goods are better allocated to meet changing demand conditions.

The international experience suggests that radio networks offer another promising option for aggregating and disseminating market information, especially where transmissions in local languages can be used to overcome both language and literacy barriers. Stakeholders in the sesame value chain can develop partnerships to improve market intelligence systems by adding sesame quality, price and good practice information. Current information platforms with the potential for expansion include the Government’s Agricultural Market Information System (Sistema de Informação de Mercados Agrícolas—SIMA and INFOCOM) and Extension Radio, which is operated by AGRA.

8 World Bank, World Development Indicators (2012)

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8. THE BUSINESS CLIMATE AND THE SESAME VALUE CHAIN

Mozambique’s business climate has a major impact on the sesame value chain. Because agricultural exporters are price takers in the global marketplace, high administrative costs are borne almost entirely by domestic producers, traders and exporters. The cost of trading across borders, although moderately below the SSA average, is still very high by global standards.

Table 12 Mozambique: The Administrative Burden on Exporters

Indicator Mozambique SSA AverageNumber of documents required for export 7 8Number of days required for export 23 31Cost per container for export (in USD) 1,100 1,990

Source: World Bank Doing Business Report (2013)

Table 13 Mozambique: Costs Involved in Trading across Borders

Time (days) Cost (USD)Document preparation 13 185Customs clearance and technical control 2 250Port and terminal handling 4 365Inland transportation and handling 4 300Totals 23 1,100

Source: World Bank Doing Business Report (2013)

In addition to the 7 export documents listed in the World Bank’s 2013 Doing Business report, the study team found 2 additional documents required for sesame exports, a fumigation certificate and a phytosanitary inspection certificate, both issued at the Port of Beira. Interviews with export firms highlighted the cost of congestion-related delays at the Port of Beira; however the Port Authority indicated that exporters were to blame for bringing in additional containers after the 5 day free-storage period. These delays are likely due to a combination of inadequate port capacity and improper container storage at the port, with the latter caused in part by lack of secure warehousing facilities in the area.

The extremely high cost of enforcing contracts in Mozambique severely compromises the efficiency of the value chain. In most cases the total cost of enforcing a contract significantly exceeds the value of the claim.

Table 14 Mozambique: Costs of Enforcing Contracts

Indicator MozambiqueTime (days) 730Filing and service 90Trial and judgement 460Enforcement of judgment 180Cost (as % of the claim) 142.5

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Attorney cost 98.5Court cost 24Enforcement cost 20Procedures 30

Source: Doing Business Report 2013, World Bank

The large number of administrative procedures, high attorney costs, and especially the two years required to pursue a breach-of-contract claim to its conclusion represent major liabilities for both buyers and sellers and discourage the establishment of long-term business relationships. These costs present a serious obstacle to farmer associations attempting to negotiate direct contract arrangements with exporters or vice-versa, one which must be addressed in the design of prospective interventions in the value chain.

9. STRENGTHENING THE SESAME VALUE CHAIN

Figure 3 Mozambique: Ansoff Matrix for the Sesame Value Chain

New

/ Im

prov

ed P

rodu

ct

Existing exporters buy high-quality white sesame

South Africa processors demand white sesame, as do Fairtrade labels and organic brands

The production of white sesame can be strengthened by:Improved seed varieties and agricultural extensionNo mixing of seeds either before planting or during post-harvest handlingImprove cleaning during post-harvest handling

Sustainability requires :High levels of cleanlinessImproved varietyStrong producer organisationsCompliance with standardsContracts and sourcing plansTraceability and origin

Old

Pro

duct

Existing exporters buy low-quality undifferentiated sesame

Importers beyond traditional trading partners (Turkey, China, India) demand undifferentiated sesame

The production of undifferentiated sesame can be strengthened by:Improved qualityThe improvement of existing supply-chain agreementsIncreased productivity

Sustainability requires:Improved qualityThe development of new supply chain relationshipsIncreased productivity

Old Markets New Markets

Source: Authors’ Figure Based on Ansoff Matrix Template

The Ansoff Matrix presented in Figure 3, above, divides the sesame value chain into four quadrants, (i) new products in old markets, (ii) new products in new markets, (iii) old products in new markets, and (iv) old products in old markets. Interventions can be designed to strengthen any or all of these aspects of the value chain, depending on which best suits the circumstances and ambitions of

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relevant stakeholders. In order to be successful interventions will require increased investment, stronger producer groups, and improved coordination among producer groups and other value-chain actors. Special attention should be given to the opportunities presented by downstream actors (exporters and destination-market firms) that have developed strong reputations and specific competencies, including product certification. Two examples of firms that have built reputations for quality and offer a range of certification options are presented in Table 15, below.

Table 15 Example of International Sesame Supply Chain Relationships

Product Exporter Country Certifications Destination Markets and Supermarkets

Sesame Paste

Hebei Royal Trading Company Limited

China BRC, HACCP, ISO 9001

Carrefour, Metro, Auchan, Billa, Casina, Netto, Migros

Sesame Paste

Narin Bys Dis Ticaret Anonim Sirketi

Turkey BRC, FDA, HACCP, KOSHER, HALAL

UK, Middle East, USA

Source: Information Published on Firm Websites

Over the short term, farmer associations, export firms, industry groups and other actors in Mozambique’s sesame value chain should be encouraged to collaborate with well-established firms serving both new and existing export markets. Over the longer term, interventions in the value chain can empower Mozambican actors to build their own competence in conducting certification procedures and establishing direct relationships with retailers in destination markets.

Table 16 Mozambique: Prospective Strategies for Strengthening the Value Chain

Value Chain Actor Intervention Strategy Examples that can be Scaled-Up/Copied

Input Suppliers Facilitate access to improved seeds Improve labelling of seeds Provide specific information on

treatment of seeds Promote suitable package sizes (for

use on fields greater than 1 ha) Increase geographical coverage of the

input supply network

Greenbelt on fertilizer Agrifocus intended seed treatment IFDC agro-dealers program in

Tanzania a private sector link was done with the agrochemicals company, BYTRADE. Through negotiations with NARI,BYTRADE supplied flea beetle control insecticide in very small packs sufficient to treat seed for 1 ha, making it affordable for smallholders

Producers Organise farmer associations to: (i) jointly procure inputs at discounted bulk rates, and (ii) collectively market output, including via contract farming

Provide agronomy trainings on subjects such as planting times and techniques

Promote row planting instead of broadcasting

Some PO’s in Buzi and Nhamatanda could be role model.

Some past projects like Promec, FHI.

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Value Chain Actor Intervention Strategy Examples that can be Scaled-Up/Copied

Promote use of improved seed Avoid mixing seeds of different

varieties Use appropriate pest-control

technology (organic/conventional) in coordination with neighbouring farmers

Improve post-harvest handling with a focus on product cleanliness

Facilitate access to and use of new productive technologies through demonstration plots and by calculating return on investment

Traders Focus on product differentiation: Create quality-certification systems in

concert with traders Safeguarding the integrity of white

and organic varieties through clear labelling, individual bagging, separate transport systems, etc.

Spread market information to facilitate competition and reduce price disparities between traders

Potential traders include SENWES, Sunsmile, others…

Processors Establish contract-farming systems in which processors provide inputs and extension services and even capital for irrigation and other improvements in return for guaranteed delivery of high-quality product

Strengthen long-term relationships with producers

Commit to paying quality premiums based on clear standards and jointly promote product-grading systems

MLT tobacco AgDevCo patient capital, ECA ETG inclusive Business model

Exporters Strengthen long-term relationships with producers

Commit to paying quality premiums based on clear standards and jointly promote product-grading systems

Encourage investment in organic / Fairtrade certification and exploration of new destination markets

IKURU organic / Fair Trade exports ETG inclusive business model

Source: Study findings

Table 16, above, presents a list of intervention strategies at each level of the value chain. The study team recommends that a selection of actors from each level be organised into a working group, facilitated by SNV. A number of prospective partners in the development of the sesame value chain

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are identified in Annex E of this report. This working group will draw on its own intimate knowledge of the Mozambican sesame market as well as the experience in agricultural development programming offered by SNV to determine an appropriate strategy for strengthening the sesame value chain in the Beira Corridor. SNV and the BACG initiative will mobilize funding from multiple sources to pilot interventions, and the lessons learned during the pilot phase will be rapidly applied to the formulation of broader and more comprehensive market-based solutions.

10. THE APPLICATION OF SUCCESSFUL BAGC MODELS

The study team examined the commercialisation models and service programmes that have been proposed or are currently being implemented by the BAGC. Several applicable models for sesame value-chain upgrading were identified at the production level. Interventions based on these models would require the support of complementary marketing programmes focused on supporting farmer associations to develop product grading and collective marketing systems.

Table 17 The Beira Corridor: BAGC Models

Smallholder Commercialisation Models Description Sesame Value Chain Application

This is a familiar model in which a commercial farm ‘hub’ provides services to smallholder farmer organisations. Here the commercial farm would extend irrigation to smallholder farm communities as well.

Scale of production would allow for approaching Fairtrade/organic certification agencies

World Bank/ProIRRI investment in irrigation via outgrowing schemes already underway

Under this model irrigation services are leased to commercial and smallholder farmers. A modular layout allowing plot configurations ranging from 5 to 50 ha. Allows smallholder farmers to expand to medium size.

Gravity-fed small-scale irrigation is feasible for sesame farmers, but sesame would have to compete with other high-value crops, this will depend on market access and location.

Dragline irrigation is also a potential option, but determining its cost effectiveness would require further analysis.

Smallholder Service-Delivery Programme Description Sesame Value Chain Application

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An extension of the “hub model” described above. In exchange for access to certain types of financing support all commercial farm hubs would provide smallholders within a 25km radius with access to lower cost inputs, improved post-harvest facilities and access to marketing and extension services.

Existing commercial sesame farmers and farmer associations would facilitate the rapid expansion of the hub model in the Beira Corridor.

Source: BAGC and Study Team

11. COMPARISON OF PRODUCTION SYSTEMS

Various production systems for smallholders are possible each with different characteristics and returns. The important realisation is that agronomic practices must improve for farmers to earn a sustainable and economically viable return from sesame production as illustrated in the table below.

Alternative Producer Scenarios / Treatments1 2 3 4

Treatments Farmer Practice Treated Seed & Pest Control

Improved Seed and Fertilizer

Irrigation

Average plot size ~0.5 ha ~ 0.5 - 1.0 ha ~ 1,0 - 2,0 ha > 2.0 ha

Seed retained seed (grain)

treated retained seed (grain)

improved & treated (Lindle)

improved & treated (Lindle)

Plant spacing (mainly) broadcasting

broadcasting & intercropping

(50 - 60) x 10 cm 60 x 10 cm

Seeds per planting hole 3 to 5 3 to 5 2 to 3 2

Density control replanting to replace affected plants (labour intensive + low yield)

Yes not needed not needed

Pest control increasingly yes, but not very effective

yes (1st 3 weeks)

yes yes

Fertilizer use – base wood ash or none

wood ash or none

120 NPK/ha 120 NPK /ha

Fertilizer use - top dressing none None 100 UREIA/ha 100 UREIA / ha

Weeding 1 or 2 depending 2, but 2; hired labour 2; hired labour

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1 2 3 4Treatments Farmer Practice Treated Seed &

Pest ControlImproved Seed and Fertilizer

Irrigation

on family labour available

depending on family labour available

Estimated yield 0.2 - 0.4 Mt/ha 0.4 - 0.6 Mt/ha 0.6 - 1.0 Mt/ha 1.0 - 1.5 Mt/ha (or higher). 2 Harvests/ year

Farm implements & tools - depreciation 50%

machete, hoe & handle, scythe

idem + Backpack sprayer

Back pack sprayer, machete, hoe, scythe

Back pack sprayer, machete, hoe, scythe

Capital cost - drag line irrigation USD 5,000 / ha

Depreciation capital cost 10% USD 500 = MZN 14.500

Operational cost 10% (assuming electr. & water on serviced plot)

USD 50 = MZN 1.450

Source: Study findings and estimates

Sesame production costs for one hectare and respective gross margin under different treatments – Farmers Practice and Treated Retained Seed

Activity / cost (MT / MZN) Farmer's Practice Treated Retained SeedLand preparation (wood logs removal) 1,200 1,200

Land cultivation family labour 1,500 family labour 1,500

Seed 6kgs at 40 Mts 240 5 kgs x Mts 60 300

Treatment of seeds 0 bought from agro-dealer

Base Fertilizer Wood ash or nothing 0 Wood ash or nothing 0

Planting 150 150

Pesticide / herbicides 2 * 250 ml 300 3 applications 450

Dressing 0 0

Weeding 1 family labour 450 family labour 450

Density control family labour 600 family labour 600

Weeding 2 family labour 600 family labour 600

Harvest family labour 500 family labour 500

Hulling family labour 900 family labour 1,500

Packing & transport to market family labour 100 family labour 100Farm implements & tools - depreciation 50% no sprayer 240 865

Total investment 6,780 8,215

Yield per hectare 300 500

Average price per kg 25 25

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Activity / cost (MT / MZN) Farmer's Practice Treated Retained Seed

Total income 7,500 12,500

Gross margin MZN 720 4,285

Gross Margin % 11% 52%Source: Study findings and estimates

Table 13b: Sesame production costs for one hectare and respective gross margin under different treatments – Improved Seed, Fertiliser and Irrigation

Activity / cost Improved seed and fertilizerImproved Seed, Fertiliser and

IrrigationLand preparation 0 0Land cultivation Mechanized 2,500 2,500Seed 3kgs x Mts 100 300 6kgs x Mts 100 600Treatment of seeds 3kgs @ Mts 7,5 / kg 23 45Base Fertilizer 120 kgs NPK 3,600 240 kgs NPK 7,200

appears to substitute 50 kg UREIA 0

appears to substitute 50 kg UREIA 0

Planting 150 300Pesticide / herbicides 3 applications 450 6 applications 900

Dressing 100 kgs UREIA 2,400 200 kgs UREIA 4,800Weeding 1 hired & family labour 450 hired & family labour 900Density control 0 0Weeding 2 hired & family labour 600 hired & family labour 1,200Harvest hired & family labour 500 hired & family labour 1,000Hulling hired & family labour 2,400 hired & family labour 7,200Packing & transport to market collected by trader 0 collected by trader 0Farm implements & tools - depreciation 50% 865 865Irrigation-depreciation 14,500Irrigation-operational costs 1,450Total investment 14,238 43,460Yield per hectare 800 2 harvests/yr. 2,400

Average price per kg 25 25Total income 20,000 60,000Gross margin MZN 5,763 16,540Gross Margin % 40% 38%Source: Study findings and estimates

Table 14: Summary of Gross Margins for 4 Scenarios / Treatments1 2 3 4

Activity / cost Farmer's practice Treated retained seed

Improved seed and fertilizer

Irrigation

Total income 7,500 12,500 20,000 60,000Gross margin MZN 720 4,285 5,763 16,540Gross Margin % 11% 52% 40% 38%

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Source: Study findings and estimates

Although Treatment 2 would appear to offer a higher return for producers, it has several high risk exposures particularly the dependence on rainfall. The study determined both from farmers and the agriculture officers that losses were heavy due to rain dependency and seed planting patterns and thereafter further increased by pests and diseases.

It is also dependent on 3 year field cycles where the farmers open new land, and depending on rainfall get declining returns from Year 1 into Year 2 and abandon the field after Year 3. A more detailed summary of the risks is presented in the table below;

Table15: Risks and Sustainability1 2 3 4

Treatments Farmer Practice

Treated Seed & Pest Control

Improved Seed and Fertilizer

Irrigation

Risk profile rain-fed; high risk of crop failure rain-fed; high risk of crop failure

low-risk of crop failure; high yields 'guaranteed'

Sustainability

unsustainable slash-and-burn agriculture; with fast declining yields after year 2

Investment in soil health combined with rotation cropping with maize, cow peas, etc.

Investment in soil health combined with rotation cropping with high-end horticulture crops

Moral Hazard

High transaction costs

High transaction costs

In the TZ example managers from the leading sesame exporter, who is also active in Mozambique, attended the inception workshop and agreed in principle to paying a premium for white sesame. In practice this did not happen although some farmers groups packaged their white separately from the local sesame. The TZ survey revealed that because sesame from this region sells in the oil market there is no premium available for seed colour which is a requirement of the confectionary market. However, it may be that some exporting companies are doing their own separation and accessing price premiums. The same is confirmed for Mozambique.

Threat of El Nino

.

El Niño is a recurrent weather phenomenon that takes place approximately every two to seven years and usually lasts between 12 and 18 months, depending on the magnitude of the warming of surface water. According to FEWSNET Equatorial sea surface temperatures (SST) are greater than 0.5°C above average across the equatorial Pacific Ocean, an indicator that El Niño conditions are gradually developing. Statistically, there is an increased chance for some areas to receive below-average rainfall during El Niño events, though impacts vary. Reduced rainfall during the critical flowering and maturation period of cereal crops, such as maize, during the second half of the season (January-March 2013) can impact crop development and output. Parts of southern Africa are typically prone to dry spells between January and March, including Botswana, northern Namibia, southern and central Mozambique. During an El Niño event there is a higher probability that dry spells will occur. If dry spells are long and occur during a critical phase of crop development, crop yields will be impacted

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12. CONCLUSIONS AND RECOMMENDATIONS

This analysis of the sesame value chain in the Beira Corridor identified a number of important constraints that reduce the efficiency and productivity of the subsector and limit its impact on the incomes and livelihoods of sesame farmers. The most important obstacles to the inclusive, broad-based and sustainable development of the value chain include: (i) limited access to improved seeds and other inputs; (ii) poor agronomy practices that reduce marginal productivity; (iii) the absence of quality standards and product differentiation in the domestic market, (iv) inadequate market information among producers; and (v) a lack of strong farmer associations that would enable direct contract negotiations, collective marketing, product grading and ethical-sourcing certification, and economies of scale in input purchasing.

Strengthening the value chain will require addressing each of these obstacles through a comprehensive, multi-stakeholder approach. Effective interventions in the sesame subsector will involve: (i) establishing partnerships with actors at each level of the value chain; (ii) building direct linkages between producers and exporters; (iii) developing relationships with associations that have installed irrigation systems, including non-functional systems that can be rehabilitated; (iv) expanding market information networks; (v) promulgating common standards for sesame quality and encouraging purchasers to offer quality premiums; and (vi) promoting the use of improved seed varieties.

Targeting Interventions and Identifying Access Points in the Value Chain

The findings of this analysis indicate that interventions will be most effective if they are targeted to reach geographical areas where the potential productivity gains are greatest, as well as leveraging the support of existing actors at each level of the value chain. At the production level a prospective intervention could focus on the multiplication and expanded use of improved seed varieties and encourage investment in irrigation networks.

The Mozambican Government’s Institute of Agricultural Research (Instituto de Investigação Agrária de Moçambique—IIAM) has been attempting to promote the use of improved seeds, but its efforts are hindered by a lack of funding. Private-sector firms such as MozSeeds9 have also invested in expanding the use of improved seeds, as have associations of smallholder seed producers, and prospective interventions can draw on the lessons learned during from their experience.

Associations that operate irrigation networks can assist in disseminating improved seed varieties, but irrigation itself is critical for bolstering sesame production and reducing producers’ vulnerability to weather-related shocks. Establishing partnerships with these associations will be an important first step for improving sesame production. Commercial farms with irrigation systems that can be expanded to neighbouring smallholders also offer important opportunities for intervening at the production level.

9 A division of Mozfoods, SSA. Rua Joseph Ki-Zerbo, 255 CP: 2112, Maputo, Mozambique www.mozfoods.com

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At the marketing level, the key to a successful intervention in the sesame value chain will be to strengthening the capacity of farmer associations, enabling them to organize their constituent farmers into a commercial enterprise capable of negotiating directly with purchasers. Strong farmer associations will enable farmers to achieve the necessary scale of production to allow for reliable grading and quality certification, which in turn will enable purchasers to offer quality premiums that reward investment in improved inputs and agronomy techniques. Ultimately, these associations may be able to attract interest from international ethical-sourcing certification agencies, further increasing the price premium available to farmers.

Efforts to strengthen producer groups would be complemented by interventions at the sector level designed to establish a set of common quality standards and evaluation criteria among producers, traders and exporters. A first step would be to set up a regular forum for multi-stakeholder dialogue; in this context, the existing provincial and district agricultural meetings offer an entry point for a sesame-specific platform. SNV is currently facilitating a multi-stakeholder forum for oilseeds in Nampula, focusing on soybeans, groundnuts and sesame, which could serve as a model. Many of the participants in this forum are also active in the Beira Corridor.

Prospective Investments in Strengthening the Sesame Value Chain

Strengthening the sesame value chain in will require investments in four main areas. A successful intervention must invest in the capacity of farmer associations and in supporting multi-stakeholder collaboration, including the establishment of a sector working group comprising actors from all levels of the value chain. Activities in this area should be pursued through coordinated efforts by public extension services, farmer associations, SNV and other NGOs, and private firms ranging from input suppliers to traders and exporters. SNV’s experience has shown that mobilizing funding for innovation and the development of inclusive business models can greatly facilitate the development of improved processes for sector-wide coordination between stakeholders.

Investments in in input supply should focus on building the technical as well as the financial capability of input dealers to stock, sell and expand access to improved seeds. Expanding the use of high-yield, disease-resistant varieties will in some cases require securing proprietary rights to improved seeds as well as investments in field testing and multiplication. Training input dealers in the use of appropriate fertilizers, pesticides will be equally important. Investments to increase access to affordable working capital would help to ensure that input dealers have adequate stock for successive planting seasons.

Investments in expanding or rehabilitating irrigation systems could greatly increase productivity, potentially allowing for two harvests per season. However, it will be important to conduct initial opportunity-cost assessments against alternative crops in order to determine the best use of irrigation investments. Once these assessments have verified the economic viability of irrigated sesame, an intervention should attempt to leverage public irrigation programmes and irrigation support provided by NGOs and other international agencies.

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On the marketing side, investments in storage facilities would allow producers to take advantage of significant seasonal price fluctuations. Most farmers currently sell all their produce immediately after the harvest, when prices are very low, because they lack adequate warehouses or silos to store their crops. Investments in storage facilities combined with complementary insurance and financing safeguards would allow farmer associations to sell their produce at much higher prices later in the season; based on local market conditions, higher prices may allow for the inclusion of a repayment system, which would recoup all or part of the initial investment to use for further programming.

Further marketing investments could be directed toward linking farmer associations and domestic export firms with ethical-sourcing agencies that deliver price premiums, such as organic or Fairtrade certification. Although ethical-sourcing certification offers considerable returns, especially to farmers, attaining it typically requires substantial investment at the producer and supply-chain levels to ensure that the final product would be of traceable origin and uncontaminated by noncertified sesame. Certification-related investments should be made on the basis of contracts negotiated with brands and firms who are themselves willing to make additional investments in strengthening the value chain, such as through the Fairtrade Producer Certification Fund.

Even with these interventions, a large share of sesame farmers will continue to supply low-quality undifferentiated sesame to the traditional export market. Further efforts can help to build the capital structure required to increase private-sector investment in domestic processing, which could boost prices in the domestic value chain even in the absence of improved production techniques or marketing practices. Equity investments in value-adding processing, such as sesame oil production, can be pursued in concert with technical assistance.

Market Constraints and Imperfect Competition

The concentrated structure of the domestic sesame market, in which many small-scale producers sell to a few large-scale buyers, seriously compromises the efficiency of the value chain. Many sesame farmers are essentially locked in a captive-supplier relationship with a single export firm; and many of these firms are working to vertically integrate the supply chain by expanding into trading, processing, and even input supply. Strengthening farmer associations, enabling them to source inputs and market their produce collectively, would help to offset the market power of large firms. Strong farmer associations could also assume greater responsibility for providing extension services to their members. Negotiating marketing contracts between farmers and exporters would serve to reinforce the legitimacy of farmer groups in the value chain, enabling them to further improve their marketing clout.

The nature of the sesame market is such that any successful value-chain intervention will require close collaboration with exporting firms. Establishing or expanding industry forums would allow for increased cooperating between exporters, traders, and farmer associations, such as in determining common quality standards and grading criteria.

Geographic Focus Areas

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The available evidence suggests that Sofala Province should be the focus of prospective interventions in the sesame value chain, as it accounts for roughly 50% of all sesame production in the Beira Corridor. Within Sofala the districts of Nhamatanda, Caia and Gorongosa are currently experiencing the fastest growth rates for sesame cultivation, presenting a prime opportunity to increase productivity at farm level while working to strengthen the still-expanding marketing systems for sesame in these districts.

Within Caia District the Murraca area would be compatible with the logistical demands of a large-scale agricultural intervention, while in Gorongosa the Nhalirose area would serve as a suitable base of operations. In Nhamatanda consideration should be given to the Metuchira Pita, Tica and Muda areas, each of which offers unique advantages and drawbacks. The study estimates the combined number of sesame fields in all three districts at 42,000, for a total cultivated area of 21,000 hectares. Based on the limited available data, in Sofala Province an estimated 330 hectares of sesame is cultivated by farmers’ associations with access to irrigation systems; these associations would serve as a core group that the intervention would seek to expand upon. The proposed intervention would begin by establishing reliable baseline values for marginal productivity, total productivity, and farm-gate prices in the targeted area, as well as the skill level of local farmers, the availability of arable land, access to investment credit, and other factors that may affect the final evaluation of the intervention’s achievements and their potential reproducibility in other areas.

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REFERENCESAnonymous, 2002. Overview of the Nigerian Sesame Industry, Chemonics International, USAID, November 2002

Gardiner, T. 2010. Engajamento do pequeno productor do sector familiar na cadeia de valores de gergelim. Provincia de Nampula, Mozambique. CNFA/Projecto SANA.

Gereffi G., Humphrey J. and Sturgeon T. 2005. , The governance of global value chains, Review of International Political Economy 12:1 February 2005: 78–104

Hillocks R. , Linking the production to market chain for the development of smallholder agricultural commodities using sesame in Mozambique and Tanzania as a model. Interim narrative report, Natural Resources Institute, University of Greenwich, UK

Reeder J., Jabara C and Burket S, 2003, Industry and Trade Summary - Oilseeds, United States International Trade Commission, USITC Publication Number 3576, February 2003

SNV Mozambique. 2011. Production Mapping & Value Chain Updating For: Groundnut, Sesame And Cashew Crops Consultancy Report, SNV-Nampula Portfolio, December, 2011

Thurlow, J. 2008. Agricultural Growth and Investment Options for Poverty Reduction in Mozambique.ReSAKSS Working Paper # 20, International Food Policy Research Institute (IFPRI).

USAID 2010. Market Intelligence Report: Alternative Markets for Nigerian Sesame Exports, USAID, October 2010

World Bank 2013. Doing Business Report 2013 (10th Edition) - Mozambique, Smarter Regulations for Small and Medium Size Enterprises, World Bank

WEBSITESwww.mysupermarket.co,uk accessed November 2012www.alibaba.com accessed November 2012www.sesameseedreport.blogspot accessed November 2012www.faostat.com accessed November 2012www.Mozfoods.com http://www.beiracorridor.comhttp://olamonline.com/products-services/spices-vegetable-ingredients/sesame/sustainabilityhttp://www.etgworld.com/commodities/oilseeds/

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Annex A: Terms of Reference

Beira Corridor Sesame Value Chain Development ProjectTerms of Reference for Value Chain Analysis

BackgroundSesame has emerged as one of the key cash crops for smallholder farmers in the Central and Northern regions of Mozambique. Although the crop witnessed significant growth since its commercial introduction from about 2002 to 2005, production has stagnated in the last 4 years; largely due to agronomic challenges. Sesame is essentially a smallholder farmer crop. More than 300.000 farmers are growing sesame throughout the country, of which 40% in the centre of Mozambique along the Beira corridor. The potential yield per hectare is 500 kg but farmers are getting less than 400 kg due to poor crop management and low use of inputs. Market opportunities for the crop remain firm. More immediate opportunities are in export of sesame seed, while with increased production, processing into sesame oil may become viable. Sesame is currently mostly exported unprocessed to Asia and the Middle East. Opportunities exist for export of cleaned and de-hulled sesame seed to premium confectionary markets in Europe, in order to capture more value domestically. Mozambique has the opportunity to build origin-identity to satisfy niche markets for organic and fair trade sesame.The Government’s Strategic Plan for the Agriculture Sector (PEDSA) identifies the Beira corridor as a catalyst to drive agricultural development in the country, within which initiatives are being promoted to attract increased public and private sector investment. The location is being targeted due to its huge production potential for food, cash crops, livestock, forestry, fisheries, and also its integration with domestic, regional and international markets. Increased support for the Sesame value chain presents opportunities for new business ventures for the various private sector operators within this chain, as well as for increased income for the participating farmers.

Relevant Interventions by SNVThe US$1.8 Million PROMER project has an impact target of improved income for 6.000 households through increased agricultural productivity by 2014. The program aims to improve the functioning of rural markets and market linkages for maize, sesame, groundnuts and beans for 20,000 small holder producers. SNV Mozambique implements the US$1.8 Million Producer Organization Support component in four districts in the Zambezia and Nampula provinces. Also in the north, SNV has been working with Export Marketing on the piloting outgrowing schemes for sesame with small-scale commercial farmers.In 2011 SNV established a national oilseeds multi-stakeholder platform with shared challenges and opportunities by different actors. Sesame, groundnut and soya beans are the three cash crops identified by the platform members for further value chain development. Since April this year, SNV is implementing a project to improve food security (in one of 4 Provinces of the corridor) with financial support from AGRA (Alliance for a Green Revolution in Africa). The

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project focuses on good agriculture practices which include soil fertility management, intercropping legumes (pigeon pea) and maize as the staple food in the region. Recently, the Beira Agriculture Growth Corridor (BAGC) partnership invited SNV to develop a Partnership Concept Note Program for an intervention in the near future.

The sesame partnership between BAGC and SNVThe BAGC initiative is supported by a group of private sector agribusinesses, both local and international, plus donors and lead ministries. It comprises: (i) the BAGC Partnership, a Mozambican not-for-profit membership organisation; and ii) the BAGC Catalytic Fund, a social venture capital investment vehicle. The BAGC Partnership is working on: (a) BDS Supply (VOSD; integration of smallholders; irrigation; land, electricity, seeds and fertiliser; Catalytic Fund; (b) Investment Promotion, (c) Enabling Environment: (d) Partnerships and (e)knowledge management;The BAGC seeks to partner with SNV in mobilising stakeholders interested in further development of the Sesame value chains. The aim will be to facilitate the creation of a Sesame Value Chain Partnership that would collaborate in the development of the Sesame Value Chain. Key initial activities will be carried out from October to December 2012. During which period BAGC and SNV will jointly develop a Partnership Concept Note that presents and substantiates opportunities for developing and implementing a Partnership Programme within the Beira Corridor. Specifically the concept note will a) Define constraints/issues to the functioning of the sesame VC within the Beira Corridor; b) Provide information on current activities of potential partners, how partners could contribute to

the partnership, the benefits that they would derive from such partnership, issues that present challenges to their participation;

c) Identify potential sources of funds (public and private) to support intervention activities within sesame value chain, especially those to develop new smallholder integration models (around contract farming and/or hub/spoke models);

d) Identify geographical clusters / areas that could be the focus of partnership activities; ande) Define a preliminary Partnership Action Plan

Scope of the Value Chain Analysis These Terms of Reference cover the activities to be carried out in regard the Analysis of the Sesame Value Chain in the Beira Corridor. This corridor encompasses the agricultural activities in the three provinces of Sofala, Manica and Tete; grouped around the road / rail / port infrastructure, linking the hinterland to the sea port of Beira.

BAGC and SNV will jointly carry out an analysis of the sesame value chain in the corridor, consisting of:5. Value Chain Mapping and Relationships : identify the primary and supporting actors in the

sesame value chain, their roles, and interrelationships and map their interactions;6. Market Trends & Competitiveness : identify sales markets and trends, unmet demand, growth

perspectives and (international) competitors;7. Governance : identify how the value chain is organized, where decisions are made and what the

position of the poor is in the chain. Specific attention to be paid to identification and description of (potential) support partners;

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8. Value Chain Constraints : identify the major constraints to value chain development and target population participation in the value chain. Including risk assessment and crop budgets.

DeliverablesThe team will produce a comprehensive report on the Sesame Subsector in the Beira Corridor as outlined above which should also include:a) A database with all actors in the chain, both direct (trading companies, processors, input

suppliers, etc.) and indirect (support organisations, research institutions, etc.), depicted in a VC map;

b) Detailed information on current activities of potential partners, how partners could contribute to the partnership, and issues that present challenges to their participation in the VC partnership;

c) Recommendations for the choice of geographical clusters / areas that could be the focus of partnership activities;

Methodology Literature study of available documentation on the sesame subsector and on the Beira Corridor

in general; Semi-structured interviews will be carried out with key actors (private companies, donors,

government institutions, VC facilitators) to look at potential market scope and develop a value chain approach that fulfils market requirements while building on existing initiatives;

Cross referencing of quantitative data with other sources and validation of findings with key stakeholders (from the private sector);

Team work with a strong learning approach towards improved quality VCA’s;

Team compositionThe VC will be carried out by a joint BAGC / SNV team consisting of James Mwai Consultant (JM)Anastacio Tamele BAGC coordinator - Beira (AT)Martinus (Tiny) Ruijten SNV Sr. Agribusiness Advisor (TR)Moises Raposo SNV Sr. Agriculture Advisor (MR)Cintia Portraite SNV Agriculture Advisor (CP)

Timing and work planPlanned Activities Team members and (days)

JM AT TR MR CPPreparation of the ToR for the VCA. x xFinalising and approval of the ToR x 0.5Literature study and preparation 1 0.5 0.5 0.5 0.5Travel to Beira 1 0.5 0.5 0.5Composition of team and inception meeting 0.5 0.5 0.5 0.5 0.5Carrying out data collection interviews in 2 provinces (Manica, Sofala) with trading companies, service providers, government, farmers’ representatives, donors, VC facilitators; analysis of data

8 5 8 4 4

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Elaboration of the draft report 2 1Presentation and discussion (by Skype) of the draft report 0.5 0.5 0.5 0.5 0.5Finalising the report 2 0.5 2Return travel 1 0.5 0.5 0.5Total 16 7 14 6.5 6.5

Resources requiredInput RemarksSNV staff contribution 3 Agric advisors for a total of 26 days, incl. travel, accommodation Consultancy 16 days consultancy fee ; air travel , DSA and accommodation for 14

days Material Office and print out materialStakeholders verification

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Annex B: Background Information on Sesame Cultivation in Mozambique

Sesame seeds come in many colours depending on the cultivar harvested. The most traded variety of sesame is off-white coloured. Other common colours are buff, tan, gold, brown, reddish, grey and black. Sesame is very drought-tolerant, in part due to its extensive root system. However, it requires adequate moisture for germination and early growth. While the crop survives drought as well as presence of excess water, the yields are significantly lower in either conditions. Moisture levels before planting and flowering impact yield the most.Most commercial cultivars of sesame are intolerant of water-logging. Rainfall late in the season prolongs adequate moisture for germination and early growth. While the crop survives drought as well as presence of excess water, the yields are significantly lower in either condition. Moisture levels before growth and increases high harvest-shattering losses. Wind can also cause shattering at harvest.Initiation of flowering is sensitive to photoperiod and to sesame variety. The photoperiod also impacts the oil content in sesame seed; increased photoperiod increases oil content. The oil content of the seed is inversely proportional to its protein content.Sesame varieties have adapted to many soil types. The high yielding crops thrive best on well-drained, fertile soils of medium texture and neutral pH. However, these have low tolerance for soils with high salt and water-logged conditions. Commercial sesame crops require 90 to 120 frost free days. Warm conditions above 23 oC favour growth and yields. While sesame crops can grow in poor soils, the best yields come from properly fertilized farms.Since sesame is a small flat seed, it is difficult to dry it after harvest because the small seed makes movement of air around the seed difficult. Therefore, the seeds need to be harvested as dry as possible and stored at 6 per cent moisture or less. If the seed is too moist, it can quickly heat up and become rancid.After harvesting, the seeds are usually cleaned and hulled. In some countries, incl. Mozambique, once the seeds have been hulled, they are passed through an electronic colour-sorting machine that rejects any discoloured seeds to ensure perfectly coloured sesame seeds. This is done because sesame seed with consistent appearance is perceived to be of better quality by consumers and sells for higher price. Immature or off-sized seeds are removed but saved for oil production.Sesame seed is a high value cash crop. Sesame prices have ranged between US$ 800 to 1700 per metric ton between 2008 and 2010.Sesame exports sell across a wide price range. Quality perception, particularly how the seed looks is a major pricing factor. Most importers who supply ingredient distributors and oil processors only want to purchase scientifically treated, properly cleaned, washed, dried, colour-sorted, size-graded and impurity-free seeds with a guaranteed minimum oil content (not less than 40 percent) packed according to international standards. Seeds that do not meet these quality standards are considered unfit for exports and are consumed locallySource: Wikipedia

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Sesame ProductsInput Products Description and Uses

Seeds Confectionary Fried seeds bound together with sugar syrup to make sweetmeats

Seeds Biscuits Whole seeds baked into biscuits

Hulled seeds Bakery Popular in northern Europe either incorporated into breads or as decorative toppings

Seeds, sometimes roasted

Oil Used in oriental cuisine. The flavour is quite strong and rarely compatible with traditional Western style cooking but also used as salad oil

Oil Medical treatment Ulcers and burns

Oil Margarine Once and important use, now other cheaper vegetable oils are available

Oil Aerosol Reported use as a synergist for pyrethrum sprays

Low grade oil Various Soaps, paints, lubricants and illuminants

Hulled seeds Tahini A paste of sesame seeds which is used as an ingredient in Eastern Mediterranean and Middle Eastern foods

Tahini Dips and spreads Various ingredients such as chickpeas or eggplants are added to Tahini to make dips and spreads such as hummus

Tahini Halva A sweet made from Tahini and sugar with other added flavourings

Cake Animal feed Protein rich supplement

Cake from hulled seeds Ingredient Used in some Indian cooking and other snack

Source: Overview of the Nigerian Sesame Industry, Chemonics/USAID

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Previous studies (Production Mapping and Value Chain Upgrading – Sesame, 2011) have identified the reference varieties ICTA-R-198, Nicaragua and Linde-02. The choice of IIAM is the last one for large scale multiplication.

That study also mentioned that there was information that Mozambique has its own indigenous varieties. No evidence was found on the presence of such varieties. However it is said that they always appear as colour mixed grains. It is more likely that such varieties are those of Tanzanian origin for instance Naliendele-92; Ziada-94 and Linde-02 types. These varieties are protected by international breeders’ property rights. They may have escaped deliberately or not through long border movement of agro-products in the North of Mozambique. The study believes that due to the unregulated nature of the sesame sector in Mozambique, the ease of spreading seeds within the country, the fact that the same buyers in the north are active in the Beira corridor and the non-existence of certified seeds, the same varieties are being used in the study area.

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Annex C: The Various Actors and Their Current Roles in the Sesame Value Chain

Primary Actors

Role Mozambique Examples

Consumers Demand ethical and sustainable foods

Consume confectionary, bakery products, paste and oil.

Tahini

Oil

Confectionary and bakery products

Processors Buy from exporters

Process seed into oil

Market the oil

Process seed into paste

Process seed for use in cosmetic and other products

Small oil processor in the north.

Most processing into paste and oil done in India, Turkey and especially China.

Fairtrade seed being processed in Kenya.

Exporters Set up buying posts during the season

Provide retained grain as seed

Bulk the product

Use staff as field buying agents

Provide storage

Process export documentation

Buy from traders

Semi-processing such as de-hulling

Sorting by colour and

Finance some traders

Export Marketing (ETG)

OLAM

Indo Africa

Others

Traders Act as agents for exporters/ processors

Bulk produce

ETG agents

Other traders

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Pay farmers

Source for produce

Producers Plant seed

Apply pesticides and fertilisers

Weed, space and harvest

Sort and bag

Various

Seed Multipliers

Planting of certified seed

Application of on farm principles

Harvest and bag

IIAM had attempted this in the past but was hampered by funds. This role needs to be done commercially by firms such as MozSeeds and by associations of smallholder seed producers.

Input Suppliers

Buying of seed from seed companies

Sorting of grain into seed for next season

Bagging of the seed

Providing advice on pesticides and fertilisers

SEMOC

Agri Focus

ETG (Fertiliser Plant)

Greenbelt

Secondary Actors

Port Operator

Loading and offloading of cargo & containers

Verification and documentation

Storage facilities

Cornelder

Fumigation Companies

Provide on-site fumigation and issue a certificate

Fumigation companies – e.g. Delports, Fumigan

Government Inspectors

Provide certificate for SPPS at the port for export and imported goods

Provide information for public use

Posto Fytosanitario

Extension Workers

Advise farmers on good agricultural practices

Gather and share information for public use

SPA

Research Institutes

Investigate, develop and issues varieties IIAM

Information Providers

Develop content and package it for dissemination

SIMA

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Extension Radio - AGRA

Source: Study findings

Annex E: Prospective Partners in Strengthening the Sesame Value Chain

1. Export Trading GroupETG concentrates on two major oilseeds: soybeans and sesame. ETG procures and processes both of these commodities. It sources sesame mainly from West Africa, Tanzania and Mozambique and is thereafter exported to Europe, the United States, and East Asia. In 2011, ETG traded a total of 39,819 MT of sesame. ETG is committed to adding value to all the commodities which are carried through the supply chain. ETG owns a Sesame de-hulling plant in Nacala, Mozambique which is equipped with state of the art machinery and a staff complement of more than a 100. The plant has a processing capacity of 6,000 MT per annum. With the availability of this site, ETG has the means to purchase and export both raw sesame pods as well as seeds which have already been de-hulled. (Source ETG website accessed November 2012)

2. Corredor Agro (CAL)Corredor Agro (CAL) is an agribusiness company operating in Mozambique, whose primary business objective is to add value in the agricultural supply chain by linking small scale farmers to better inputs, agricultural extension services, credit, logistics and markets. The company also aims to make agricultural produce from the region more competitive and more accessible to corporate buyers further down the value chain. CAL is currently growing and procuring the following crops: maize, soya beans, sesame seeds, pulses and cassava. In 2012, GBF committed a mezzanine loan to be used to support the long-term working capital and capital equipment financing requirement. (Source: Grassroot Business Fund website accessed November 2012)

3. OLAMOLAM is an international commodity trader as well, although with smaller throughput in sesame in Mozambique, and has shown interest in working on outgrowing schemes for sesame in Sofala province. http://olamonline.com/products-services/spices-vegetable-ingredients/sesame/sustainability

Annex F: The Role of Women in the Sesame Sector

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Actors / Role Current Status Interventions

PRIMARY

Export and Processors Mostly employed as workers at processing plants

Ensuring that up-skilling opportunities are offered for operation of machinery and non-drudgery work

Traders Study did not identify specific women traders or whether the buyers were using women as agents. Likely to face obstacles in entering this male dominated field

Women trained in entrepreneurial skills and agribusiness could take on trader roles. They would need access to working capital financing.

Producers Study determined that women are very active in production. In polygamous families the study heard that wives would have access and control over allocated land. This is crucial for food security and family income. The study heard of women being trained but their husbands collecting the certificates.

Women farmers need to be targeted for farm improvement programmes. Such training will need to take into account the time burdens of women as they have to perform other roles.

Input Dealers / Suppliers

No women dealers and suppliers were observed.

Training on agro dealer should have affirmative action for women who are either currently operating small and medium enterprises or have been trained in agribusiness and entrepreneurship. Examples of such models are at Young Africa

SECONDARY

Extension Workers In meetings with the SPA the study found that only ¼ field staff in the district were women, whilst there was no woman at the provincial level

Working with other partners encourage the recruitment of women extension workers

Source: Study findings and author recommendations

ANNEX G: Interview and Contact List

No. Entity Location Contact Person

Post/Title Contact Email

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No. Entity Location Contact Person

Post/Title Contact Email

1 Agencia de Desenvolvimento Economico Local de Sofala (ADEL Sofala)

Beira Rodolfo Coordinator 23262145/23362142/825679420

adelsofala@tdm.co.mz

2 AGRIECO Beira Jose Cristiano Taimo

Director 827277568 josetaimo@gmail.com

3 AGRIFOCUS Beira Julio Douglas

Technical and Commercial Manager

825015300/23328656

agrifocusbeira@teledata.mz

4 Associacao Abencoada de Metuchira

Nhamatanda Rita Santos Board Member 827051788

5 Comite Ecumenico para o Desenvolvimento Sustenatevel (CEDES)

Beira Manhica 23322051

6 Export Marketing Co. Lda. (ETG)

Beira Indrasena Reddy

Branch Manager

23320854/23320855

emcibeira.moz@exporttradinggroup.com

7 Greenbelt Fertilisers, Ltd

Beira John Christie-Smith

828096106 porkycsmith@green

8 Organizacao para a Ajuda Mutua (ORAM)

Beira EditeCunhete

Assistant Coordinator

825977690 editecunhete@yahoo.com.br

Elizabeth Roque

Coordinator 829578922

9 The Lutheran World Federation (LWF)

Beira Luis M. Gonda

Project Manager

825538360 luis@lwfmozambique.org.mz

10 Young Africa (YA) Beira Dorien Beurskens

Executive Director

825178112 dorien.beurskens@youngafrica.org

11 Limpex Beira Beira Julio Douglas

Owner 825015300/23328656

agrifocusbeira@teledata.mz

12 Rocha Caia Rocha Sesame Intermediate Buyer

826005385

13 Nhamatanda District Services for Economic Activities (SDAE)

Nhamatanda Andre Pita Head of Agriculture and Fisheries Repartition

825728090

14 Dondo District Services for Economic Activities (SDAE)

Dondo CamiloArtur

Director 827091760

15 Lamego Administrative Post

Lamego Bundua Extension Worker

820568993

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No. Entity Location Contact Person

Post/Title Contact Email

16 Bene Seed, Lda Dondo 825014430

17 Dorcas Aid International

Beira Simbarawari B. Njopera

Country Coordinator

823078528

Beira Paulo VirgilioSaene

Accountant/Administrative

820167490

18 Phytossanitary Inspection Post (PIF) - Beira

Beira Pinto Technician 822215240

19 Sofala Provincial Services for Agriculture

Beira Edson Almeida

Head 820445220

20 Sofala Plant Protection Services

Beira Manuel Gouveia

Head 824475330

21 Cornelder de Moçambique

Beira Felix Jaime Machado

Sales & Marketing Manager

843200120 felix.machado@cornelder.co.mz

22 Samacha Nhamatanda Samuel MassolaChamba

Manager 845720944

Beira, November 2012

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