Mozambique

Support provided to blending operations

Introduction

When the AFAP program was established in Mozambique there were three blending plants in the country: Greenbelt Fertilizantes de Moçambique Lda (now part of the Yara Group) in Beira; Omnia, also located in Beira; and Mozambique Fertilizer Company Lda (Mozfert), which had its premises in Gondola, Manica province. All these companies were strategically located along the Beira corridor for logistical reasons – it offered easy access to the landlocked countries in the region, which were the major markets for their products.

Mozfert

The company requested AFAP’s technical support to relocate the plant to new premises in Canfumpe. AFAP provided the much needed technical assistance for the re-design and relocation of the plant. This assistance then allowed Mozfert to establish a new plant and increase its production capacity from 40 to 60 tons per hour. The increase in production also allowed Mozfert to increase its supply into the Mozambique market where fertilizer usage by farmers was at its lowest.

Export Trading Group

In 2014, the Export Trading Group (ETG) established the ETC Adubos Company in Beira. AFAP provided technical assistance in their granulation plant that led to production capacity improved to 30 tons per hour, and a blending unit with the capacity to produce 60,000 tons per annum was also installed.

Greenbelt

AFAP provided a matching investment for equipment to Greenbelt. This allowed greenbelt to include a urea briquette machine, lime-crushing and granulation equipment, as well as a unit for the introduction of fertilizer deep placement technology, the production of balanced blends that include soil correctives, and the production of small packages of fertilizers suitable for smallholder farmers. As a result of its arrangement with AFAP, Greenbelt supplied urea briquettes, and small packs of NPK blends that benefited more than 400,000 smallholder farmers along the Nacala, Beira and Limpopo corridors between 2013 and 2016.

Photos: Fertilizer blending and storage at Greenbelt’s premises in Beira, Mozambique.

During the reporting period, two new investors showed interest in establishing blending plants to increase fertilizer supply in Zambezia and Nampula, provinces in the north of Mozambique. The companies, Agema Lda and Africa Fertil Lda, requested AFAP’s assistance to assess the feasibility and sustainability of the proposed investments. AFAP provided technical assistance and conducted feasibility studies for the two blending plants.

AFAP established linkages between a Pakistani multinational company interested in investing in a fertilizer plant in Mozambique with the relevant government Ministries. This multinational is willing to establish a world-class ammonium/urea fertilizer gas complex in Mozambique.

AFAP also facilitated a visit to Mozambique of senior managers of two Phosphate Companies looking for new markets.  Maaden and OCP are world-class producers of phosphate-based fertilizer with plants in Saudi Arabia and Morocco respectively. The companies are interested in gaining access to the market for phosphate-based fertilizers. As a result of AFAP’s support the companies are now in discussions with fertilizer importers, blenders and distributors with the purpose of establishing supply agreements.

In an effort to increase the fertilizer supply in the Mozambican market, AFAP has been requested by a number of companies interested in the Mozambique and neighboring landlocked countries markets, for market assessments and feasibility studies for those interested in establishing blending facilities.

Furthermore, AFAP provided technical support and guidance to the Beira Logistics Terminal (BLT), which developed a fertilizer handling and storage terminal with capacity to store 100,000 tons. AFAP provided guidance on the registration process for fertilizer imports and all other relevant regulations and requirements. This led to the company becoming one of the country’s major fertilizer importers and handling companies. In 2016 it imported, stored and distributed 60,000 tons of fertilizer through Beira.

Increase finance in the fertilizer distribution channels

Introduction

Many of Mozambique’s commercial banks remain risk averse and prefer lending money to each other and to the government. So to increase the finance available in the fertilizer distribution/supply channels, AFAP used its Fertilizer Credit Distribution and Fertilizer Supplier Payments Guarantees to reduce the risk of suppliers that established commercial relationships with distributors and hub-agrodealers. Between 2012 and 2016, AFAP approved and signed two APCs for Fertilizer Distribution Credit Guarantees and two APCs for Fertilizer Supplier Payment Guarantees. The results of the four APCs are described below.

Mozambique Fertilizer Company Lda (Mozfert)

AFAP provided a Distribution Credit Guarantee on an amount of $500,000 to the company to distribute fertilizer on revolving credit consignments to 34 hub-agrodealers affiliated to its distribution network and to hub-agrodealers involved in the European Union-Food and Agriculture Organization (FAO) Fertilizer Pilot Subsidy Program. From 2013 to 2016 the program supplied 16,030 tons of products that were distributed to about 322,000 smallholder farmers, mainly in Manica, Tete, Sofala and Nampula provinces. The total value of the fertilizer sold was about $10 million. The company has permanently integrated 30 hub-agrodealers into its distribution network, with consignment contracts signed and technical assistance provided. The company also signed contracts for output marketing with the same hub-agrodealers, since the company is part of the Meridian Trading Group that also buys farm commodities.

Photos: Managers of Mozfert and IAV Commercial sign a fertilizer revolving consignment contract (left) and an IAV truck is loaded with fertilizer.

SAVAL SA

AFAP provided a credit guarantee on an amount of $85,000 that allowed SAVAL SA to sign a contract with Greenbelt Lda (now part of Yara) for the supply of fertilizer in revolving consignments. The guarantee facility was placed at the Banco Comercial e de Investimentos (BCI) Mozambique. SAVAL’s sales volumes increased from 20 tons in 2012 to 3,577 tons in 2015 to 7,500 tons in 2016. The company served an over 143,080 smallholder farmers affiliated to 33-farmer irrigation associations that are part of the 28,000-hectare Chokwé Irrigation Scheme and the 12,000-hectare Lower Limpopo Irrigation Scheme.

Through AFAP’s assistance and capacity enhancement of SAVAL, in 2016 SAVAL signed an agreement with Greenbelt to be their hub and distribution center for the Southern region of Mozambique. The AFAP credit guarantee facilitated the supply contract between SAVAL and Greenbelt. As a result the retail price of a 50 kg bag of fertilizer fell by $12 (from $50 to $38) for the farmers working with SAVAL. Greenbelt and SAVAL have also signed a partnership agreement for the construction and co-management of a new fertilizer distribution depot in Chokwé.

AFAP has also stepped in to help increase the purchasing power of farmers. Through its volunteer program, AFAP provided the much needed technical assistance to a Micro-credit / Farmers’ cooperative bank by developing a revolving loan fund. The Limpopo Farmer’s Credit and Savings Cooperative (CPL) is now providing the much needed line of credit to smallholder farmers to enable them to buy fertilizers and other inputs from SAVAL at the beginning of each season. Thanks to AFAP’s support, CPL received an additional $200,000 from the Government’s Agrarian Development Fund (FDA) to test the facility. The revolving loan fund initially targeted 1,000 smallholder farmers affiliated to the Chokwé Irrigation Scheme. The farmers received credit so they could acquire fertilizers and other inputs, and paid the money back at the end of the cropping season. Farmers used vouchers provided by CPL to buy the inputs on credit from SAVAL. SAVAL then redeemed the vouchers at CPL every month to ensure it had enough liquidity to acquire additional inputs. The pilot revolving loan facility has a recovery rate of 97%. All this has led to these farmers doubling their fertilizer use for rice and vegetable production. The farmers moved from applying 2 by 50 kg bags to over 4 by 50 kg bags per hectare.

Photos: AFAP’s chair and vice-president visit CPL’s premises (left), and AFAP volunteer Ms. Lynda Swenson presents the proposed revolving loan scheme to managers of CPL, SAVAL and HICEP.

Following the success of the pilot of the revolving loan fund, AFAP supported SAVAL and CPL in signing an agreement with the Chokwé Agro-Industrial Company (an output trader) to finance the input line of credit as an advance for the rice, maize and vegetable production of smallholder farmers. The second phase of the revolving loan fund project started in the 2016/17-crop season with an amount of $750,000. This facility is now benefitting over 3,750 smallholder farmers. (Please refer to the diagram below for the overall AFAP integrated approach in the Chokwé Irrigation Scheme).

Empresa de Comercialização Agrícola

AFAP approved a request from Empresa de Comercialização Agricola (ECA), a farmer out-grower scheme for a fertilizer supplier payment guarantee for an amount of $84,000. ECA was then linked to a guarantee facility that AFAP already has with Mozfert. During the 2014 to 2016 period, ECA acquired a total of 5,330 tons of product on credit from Mozfert and supplied to over 15,600 smallholder farmers affiliated to the company’s out-grower scheme. As a result of AFAP’s support, ECA was able to distribute fertilizer with a retail value of over $3.2 million during the 2015/16 financial year. ECA is also an aggregator of farmers’ outputs for the markets.

Photos: Farmers belonging to ECA’s out-grower scheme sign productions contracts (left) and receive inputs (right).

1.1.1        Greenbelt
In July 2015 AFAP provided a fertilizer distributor credit guarantee to Greenbelt to distribute fertilizers on revolving consignments to farmers through a network of 29 hub-agrodealers and 160 rural-agrodealers. Under the facility, this fertilizer blender and distributor supplied a total of 9,300 tons of fertilizer and reached around 372,000 smallholder farmers in Nampula, Zambezia, Manica, Tete and Sofala provinces. The fertilizer sold under this APC agreement is estimated to be worth about $6.5 million.

In an effort to increase farmers’ purchasing power for fertilizer and other inputs, AFAP partnered with Greenbelt for the implementation of the Extension Services and Marketing Linkages for Soybeans and Sesame Smallholders Farmers Project in Manica and Zambezia provinces. The project funded by Fintrac through the Feed the Future Partnering for Innovation Program (FTF P4I), targeted 5,000 smallholder farmers and its activities included:

• training and registering farmers’ organizations;
• training farmers on input-use and best agricultural practices; and
• Establishing demonstration plots and farmer linkages with markets.

All farmers involved in the project had access to credit for inputs from the Opportunity Bank, under the same FTF P4I project.

Another instrument used by AFAP to increase finance and fertilizer supply capacity in the fertilizer distribution channel was the Matching Investment Grant for the construction and expansion of fertilizer storage facilities in the rural areas. From 2012 to 2015, AFAP signed a total of 13 APCs, of which 12 were fully implemented. One APC application is still in progress and needs a new location where a warehouse can be constructed because the land that was originally allocated has been earmarked for the expansion of the national road linking Beira to Machipanda on the border with Zimbabwe.

The total AFAP matching investment contribution for warehouse constructions is $111,896 and the total investment by all the hub-agrodealers for all construction projects in the country is over $237,600. This investment helped hub-agrodealers to increase their fertilizer storage capacity in the rural areas from 855 tons to 10,620 tons.

In return for AFAP’s support, all agrodealers engaged with farmers through activities that created and education to farmers on fertilizer applications through field days and demo plots and as such created a demand for fertilizer. These efforts were done in collaboration with fertilizer suppliers, research and vocational training institutions and rural-agrodealers/retailers. The table below summarizes the results achieved through APCs that provided Matching Investment Grants for the construction of fertilizer warehouses in rural areas.

[table id=6 /]

It should be noted that AFAP’s Matching Investment Grants (MIGs) played an important role in increasing fertilizer supply to smallholder farmers. The hub-agrodealers were the main beneficiaries of AFAP’s MIGs and, as a result, fertilizer sales increased from 2,310 tons in 2013 to 18,193 tons in 2016 and reached an estimated 727,720 smallholder farmers. The supported hub-agrodealers have contributed to an increase in fertilizer use by smallholder farmers in Mozambique by double. The farmers have increase fertilizer use from 4 kg per hectare to over 8 kg per hectare since AFAP’s assis­tan­ce.

It is important to note, that the increases in fertilizer sales varied among the hub-agrodealers. For instance, the sales of ECA, Nzara Yapera and Sikadza Kokha increased to high volumes because they operate out-grower schemes and provide linking credit to affiliated farmers, who pay back at the end of the season either in products or cash. Demand creation activities implemented in partnership with fertilizer suppliers, combined with the implementation of phase 3 of the subsidy pilot program have also helped to increase fertilizer sales.

Sikadza Kokha, in particular, decided to invest in three additional warehouses because of the impact of AFAP’s matching investment on the demand for fertilizers from farmers in Angónia, Macanga and Tsangano districts from Tete Province.

In order to optimize the use of innovative finance, AFAP in partnership with AGMARK provided training to hub-agrodealers and rural-agrodealers, and strengthened the capacity of two local organizations on issues related to agro­dealer development. A total of three training sessions’ hub-agrodealer and retailer groups were provided in the Beira, Nacala, Maputo and Limpopo corridors. A total of 67 hub-agrodealers and rural-agrodealers were trained in the following subjects:

• Basic business management skills: managing working capital, managing stocks, selling and marketing, basic business record keeping, costing and pricing, and managing business relationships.
• Product knowledge and handling skills: fertilizers, seeds and crop protection products.
• Output Marketing.

Photos: Hub-agrodealers and rural-agrodealers attend AGMARK training sessions.

Stimulate smallholder farmer demand for fertilizer

The level of utilization of fertilizer in Mozambique is far below the figures established by African leaders under the Abuja Declaration in 2006. Many factors contribute to this low demand and usage, including high costs and a lack of distribution networks. However, one of the major factors limiting fertilizer use in Mozambique is a lack of knowledge about the benefits of using fertilizer. In addition, farmers have seen a low return on their investment in fertilizers due to problems related to supply, and because of the misperception that one blend of fertilizer will fit all soils.

To assure farmers that the fertilizers they are supplied are balanced based on the soil nutrient content and crop needs, AFAP engaged Concern Universal, Greenbelt, SAVAL and more than 30 institutions – including universities, research institutions, hub-agrodealers, out-grower schemes, farmers associations and NGOs with extension capacity – to implement three fertilizer demand-creation programs along the Nacala, Beira and Limpopo corridors.

AFAP under its partnership agreements with suppliers embarked on demand creation activities.  All partners contributed financial and in-kind resources, technical assistance and expertize towards educating the farmers on efficient and effective use of fertilizers. The program involved training extension staff, agriculture college students and farmers on soil sampling; establishing demonstration plots and trials; collecting and analyzing data; collecting and analyzing soil samples; the blenders were then able to gather information for producing balanced blends from soil analysis and crop requirements; establishing demonstration plots for field days.

A total of 830 demonstration and trial plots were established and over 260,000 smallholder farmers were exposed to the benefits of using balanced fertilizer blends in maize production.

Photos: Family members plant in their demonstration plot and pose in the middle of their demonstration field.

The farmers’ field schools and trials conducted by universities and research institutions resulted in scientific reports that are now being validated by the National Institute for Agrarian Research (IIAM).

Photos:  Demonstration field day conducted as part of the demand-creation program.

Greenbelt is also supplying fertilizers to smallholder farmers through hub-agrodealers and rural-agrodealers who participated in the program. The company is now producing and supplying balanced fertilizer blends for maize, soybeans, cassava and vegetable production. New fertilizer blends include:

• NPK 15:20:11+S6.3+B0.3+Zn0.8 for maize production;
• NPK 18:28:4+S5+Zn1+B1 for maize production;
• NPK 15:23:16+S6+B0.3+Zn0.8 and NPK 14:18:18 for vegetable production;
• NPK 5:16:30+S5.5+Zn 1+B 0.5 for cassava roots production; and
• NPK 7.8:20:24+S10+B0.3+Zn0.5+Fe0.1+Cu0.2+Mn0.1 for rice production.

These blends have been have been validated by the Institute of Agricultural Research of Mozambique (IIAM) and are now undergoing commercialization.

A fertilizer demand creation partnership with SAVAL was established in 2015. Its implementation included soil sampling and analysis, recommending new fertilizer blends as per soil and crops needs, and training extension staff and agricultural college students. The program also entailed establishing a 100 one-hectare fertilizer demonstration plots specializing in rice production. Over 20,000 smallholder farmers in the Chokwé and Low Limpopo Irrigation schemes were exposed to these demonstration plots.

In addition, to increase the efficiency of nitrogen fertilization in rice paddies through the use of UDP technology, AFAP trained farmers and extension agents from the Chokwé and Low Limpopo Irrigation Schemes in the use of briquette applicators and direct paddy seeders. Shortly after the training sessions, SAVAL placed orders for 200 briquette applicators and 100 direct paddy seeders.

From 2013 to 2016 AFAP partnered with the FAO MDG-1 program for a pilot project looking at using vouchers as a way of providing input subsidies. The aim of the program was to stimulate demand for improved inputs such as fertilizers and increase farmers’ ability to purchase those inputs. During the 2013/14 and 2014/15-crop seasons the program used paper vouchers, from lessons learned using paper voucher, FAO researched on new technologies and is now testing electronic vouchers in Manica province, while continuing to use paper vouchers in Sofala, Zambezia, and Nampula provinces. A total of 19,100 smallholder farmers were part of the 2015/16 electronic voucher subsidy pilot program.

In addition, AFAP trained 56 technology transfer officers and senior extension agents from the Ministry of Agriculture and Food Security, extension agents from SAVAL and Hydraulics of Chokwé, as well as students from the Chokwé Agriculture Polytechnic Institute. The participants were trained in the following subjects:

• fertilizer best management practices and practical application of the principles;
• balanced and efficient fertilization;
• agricultural research and extension methods and practices related to fertilizer use and usage;
• soil-sampling for nutrient analysis and recommendation of fertilizer blends; and
• the use of fertilizer demonstration plots for demand-creation activities.

The training sessions were focused on best practice and were held under the AFAP Volunteer Program. The objective was to introduce participants to balanced utilization of fertilizers as a way to maximize farmers’ return on investment.

Furthermore, AFAP in partnership with Columbia University and seven other institutions, implemented the Rapid Soil Assessment System through the use of SoilDoc Kits. Under the program, which was funded by AGRA/SSTP, a total of 16 agronomists from the International Institute for Tropical Agriculture (IITA), IIAM, SAVAL, Mozfert, Greenbelt, Companhia do Zembe and the 2-Scale Program were trained. The training session focused on the use of SoilDoc kits to improve farm management and provide recommendations for balanced fertilizer blends that would result in an increase in productivity. Another objective was to carry out mapping, measurement and recalibration activities. After the successful completion of the training, the participants and representatives from the seven institutions used 11 SoilDoc kits to collect and analyze soil samples. Based on the soil analyses the participants were able to develop their own fertilizer recommendations that were subsequently shared with stakeholders in Mozambique’s fertilizer value chain.

Improve market transparency and develop the fertilizer value chain

Since the establishment of its Mozambique office in September 2012, AFAP has been engaged in a number of initiatives aimed at improving market transparency and developing the fertilizer value chain. The activities carried out during the 2012 to 2016 reporting period are described below.

AFAP’s office in Mozambique and the Ministry of Agriculture developed and signed a memorandum of understanding (MOU) aimed at promoting collaboration in the fertilizer field and creating an environment conducive to improving fertilizer use. The MOU also stated that AFAP would play a leading role in the development and support of the fertilizer value chain. As a first step, AFAP arranged for the translation into English of the fertilizer strategy and regulatory guidelines. It was then disseminated to the public and private sectors, NGOs and donors. In addition, AFAP facilitated a visit by the Mozambican Fertilizer Regulatory Body (CATERF) to Tanzania in preparation for the implementation of a fully functional fertilizer registration system in Mozambique.

AFAP assigned a consultant to train CATERF staff on the fertilizer and companies’ registration process as well as quality control measures. AFAP also signed a tripartite MOU with the Ministry of Agriculture and the Manica Polytechnic Institute (ISPM), whereby AFAP provided a matching investment on an amount of $91,855 to upgrade the ISPM lab to carry out soil and fertilizer analyses, and thus assuring that fertilizers sold to farmers are of good quality.

To establish a mechanism for dialogue in the fertilizer sector, AFAP mobilized the Ministry of Agriculture, donors and NGOs such as USAID/SPEED, AGRA, and the IFDC to launch the National Platform for Dialogue and Promotion of Fertilizer Use (NPDPFU) in 2014. AFAP also provided a grant of $100,000 to ensure the implementation of the NPDPFU action plan. The platform was institutionalized in 2015 and transformed into the Mozambican Association for Dialogue and Promotion of Fertilizer Use, also known as AMOFERT – which means ‘I Love Fertilizer’ in Portuguese.

AMOFERT includes representatives from all the stakeholders in the fertilizer value chain: policy-makers, regulators, donors, NGOs and civil society, the private sector, and farmers associations. It has played a leading role in the fertilizer policy environment in Mozambique. It has represented the country at a number of regional events and has been at the center of regional fertilizer policy events. Thanks to advocacy work by AMOFERT a 2.5% fertilizer import tax exemption was approved in December 2016. The Ministry of Agriculture has mandated AMOFERT to develop the Fertilizer Act, which it is hoped will be ready for submission for approval by parliament in 2017.

In June 2015, AFAP played a leading role in organizing the first general assembly of AMOFERT at the Lunamar Hotel in Beira at which the funder members and board of trustees were announced. AMOFERT’s strategic plan and the draft Fertilizer Bill were presented at the event.

Photos: The General Assembly of the Mozambican Association for Dialogue and Promotion of Fertilizer Use (AMOFERT) in June 2015 at the Lunamar Hotel in Beira.

Leverage AGRA funding

Although AFAP’s Mozambique office opened in 2012, its activities effectively started in 2013 and the results of those activities became visible only in the second semester of 2014. Being a new organization, before we could approach donors for funding, we needed to be able to show the results of our activities, including some success stories. Our fund-raising activity, therefore, only started in the first quarter of 2015, when we held exploratory meetings with the Dutch embassy, the World Bank, the FAO, IFAD and AGRA/SSTP, all of whom expressed an interest in supporting the program in the country.

At the request of the World Bank, AFAP has been providing updates on the progress being made on the implementation of the Fertilizer Policy Matrix, which is part of a budget support agreement between the World Bank and the Mozambique government. This has opened an opportunity for possible World Bank funding. AFAP has submitted annual reports and other relevant documents to the World Bank, which is developing a new program in the agricultural sector that includes investments in the fertilizer value chain.

The country coordinator of the FAO Millennium Development Goal Project (MDG) has emphasized the need for an MOU between AFAP and FAO Mozambique. This may open opportunities for support, including resources for implementation of programs aimed at increasing the demand and usage of improved inputs.

So far, AFAP has submitted three project proposals – to the European Union and the Norwegian and Dutch embassies – and a total of nine concept notes for potential projects to be funded. However, fund-raising activities in Mozambique were harmed by the decision of the IMF and World Bank to freeze support to Mozambique due to undeclared public debts.