Feasibility Study of the Cotton Value Chain Revival Subprogram

Report
República de Moçambique
Ministério da Agricultura
Instituto do Algodão de Moçambique
Feasibility Study of the Cotton
Value Chain Revival Subprogram
(CVCRS) for Mozambique
The Projects
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Ref
Nr
1
2
3
4
5
6
7
8
9
10
11
12
13
14
14 projects were designed to implement the CVCRS.
The projects concentrate on cotton production.
IAM is the main driver for CVCRS implementation.
Significant capacity building is required.
Title
- Development of a Cotton Research center of Excellence (Result 1.1)
- Development of a Seed Cotton System (Result 1.2)
- Establishment of Communitarian Input and Services Suppliers (Rural
Traders)(Result 1.3)
- Technology Transfer and Training of Extension Officials and Producers
(Result. 1.4)
- Development of Advanced and Commercial Cotton Producers and Farmers
(Result 1.5)
- Increase the capacity for land preparation (tillage) (Result 1.5)
- Environmental Management, Decent Work and Compliance with Health
Standards (Result 1.8)
- Development of a National Fiber Classing System (Result 2.1)
- Development of a System for Collective Cotton Trade (Result. 2.4)
- Development of Agrarian Insurance and a Mechanism for Stabilization of Seed
Cotton Price (Result 2.5)
- Promoting Cotton Processing for Hospital Use (Result 3.1)
- Promotion of Artisanal Textiles (Result 3.1)
-Capacity Building to IAM, AAM and FONPA (Result. 4.3)
- Financing Facilities for the Cotton Value Chain (Cotton Financing)
Duration - Total Budget
Years
(in USD)
10
35,975,862
3
10,487,369
7
946,000
10
24,428,238
10
3,040,000
10
10,402,000
10
5,448,000
6
10
3,580,000
3,169,340
10
5,010,000
3
10
10
10
1,190,000
2,314,884
9.886,490
2
2,400,000
CVCRS Economic Feasibility - Impacts
For the CVCRS we have calculated the contribution of the program to:
• Gross Domestic Product (value added to the national economy);
• Impact on capital formation;
• Employment creation (new jobs - person years):
o construction phase;
o operational phase – skilled, semi skilled and unskilled.
• Poverty alleviation.
3
CVCRS Economic Feasibility
Developmental impact for the programme:
(Total impact = sum of direct, indirect and induced impacts)
Impact indicators of CAPEX expenditure
Total impact
Impact on Gross Domestic Product (GDP)
US$ 1,5 billion
Impact on capital formation
US$ 2,75 billion
Total impact on employment
66,957 jobs
Impact on skilled employment
12,541 jobs
Impact on semi-skilled employment
24,719 jobs
Impact on un-skilled employment
29,696 jobs
4
CVCRS Economic Feasibility
Developmental impact for the programme:
(Total impact = sum of direct, indirect and induced impacts)
GDP impact by sector:
Combined impact
Agriculture
Manufacturing
Financial and business services
Commerce
Total Economy
Total impact
US$ (million)
810.55
28.62
63.31
620.38
1522.86
Potential poverty alleviation:
Impact
Low income households
Medium income households
Income (US$
million)
229.1
431.3
5
Project 1 - Development of a Cotton Research Center of Excellence (CIMSAN)
• Project implementation will address the main causes of low cotton
yield namely:
o Poor cotton seeds;
o Poor soil management;
o Poor cotton pest control.
Research Sections to be Created
Research Topics to be Tackled
Cotton Breeding
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•
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Breeding Techniques
Cotton Amelioration
Cotton Varieties Purification and Maintenance
Adaptive trials
Varieties Zoning
Transgenic Cotton
Cotton Agronomy and Business
Economics
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•
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Soil Management
Planting Techniques
Farming Systems
Seeds Preparation
Agro business
Cotton by Products
Plant Protection
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Investigate main cotton insect protection techniques
Investigate on main cotton diseases protection techniques
Investigate on main cotton weeds protection techniques
Investigate on most effective and economic pesticide combinations 6
Project 1 - Development of a Cotton Research Center of Excellence
(CIMSAN)
This is a non income generating project:
• The total budget for the project over 10 years is US$ 35,975,862;
• Project success relies on attracting the right personnel. Higher
remuneration than current Government salary scales may be
required. Impact may increase budget to US$ 59,675,832.
Staff
PhD Researchers
MSc Researchers
BSc Researchers
Service Agents
Total
Number of Persons
15
14
21
30
80
• This is a pivotal project that drives the impacts for all other
projects.
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Project 2 - Development of a Cotton Seed System
Project implementation will provide timely quality certified seed
to farmers, thus increasing their yields.
• A seed company must be established by private sector:
o 5 production units in cotton producing regions;
o Genetic material to be provided by Cotton Research Center
of Excellence;
o Company will focus on seed multiplication, ginning, seed
preparation and distribution;
o Distribution of seeds directly and/or via rural traders.
8
Project 2 - Development of a Cotton Seed System
This an income generating project:
• Three alternatives were investigated;
• Preferred alternative is Commercial investment propagating
own seed: - Better return on investment:
o Total investment of US$ 10,487,369.
o Cumulative cash flow after tax over 10 years is US$ 22,6 million.
o Breaks even in year 3.
o Internal Rate of Return (IRR) is 54.8%.
o Net Present Value (NPV) discounted at 10% over 10 years is US$
7.76 million.
9
Project 3 - Establishment of Communitarian Input and Services
Suppliers (Rural Traders)
Project implementation will establish a community based input
supply system to meet the growing demand.
• Project will identify and select rural traders (300) according to
the criteria already defined by IAM;
• Extensive training will be given (e.g. Business planning, proper
use/handling of agricultural inputs);
• Credit facilities to be made available;
• Linkages with agricultural input suppliers;
• Rural traders association established.
10
Project 3 - Establishment of Communitarian Input and Services
Suppliers (Rural Traders)
This is an income generating project:
• IAM would require US$ 946,000 for training courses, operating
costs and consultancies (setup costs);
• Rural Traders:
o Each will require approximately US$ 118,300 for fixed and
moveable assets;
o Cumulative cash flow after tax over 10 years is US$ 236,700;
o Breaks even in year 1;
o Internal Rate of Return (IRR) is 35.46%.
o Net Present Value (NPV) discounted at 10% over 10 years is US$
91,822.
• Total credit requirements of US$ 68,228,350 (capital,
operational expenditure and input costs).
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Project 4 - Technology Transfer and Training of Extension Officials and
Producers
Project implementation will provide training facilities (cotton
knowledge centers) and implement the curricula on integrated
cotton production (ICP).
• Will work cooperatively with the concessionary companies'
extension networks.
• Cotton Knowledge Center (CKC):
o 1 Main CKC located in Nhamatanda (Sofala).
o 20 District CKC.
o 40 Auxiliary CKC (2 per district).
o 2000 cotton farmer field schools (cffs).
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Project 4 - Technology Transfer and Training of Extension Officials and
Producers
This is a non income generating project:
• The total budget for the project over 10 years is US$ 24,428,238;
Elements
Infrastructure (Construction)
Moveable Assets (Equipment)
Operating Costs
Training courses
Consultancy fees
Total
Total
US$
7,786,092
6,857,739
8,100,092
427,575
1,256,740
24,428,238
• Effective extension services including training is essential for
achieving the primary goals of the program – improved yield
and quality.
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Project 5 - Development of Advanced and Commercial Cotton
Producers and Farmers
Project implementation will result in total cotton production from
advanced farmers increasing from 1% to 50% of total production.
• Three possibilities for the advanced farmers based on farm
area:
o Type A (10 to 50ha): 15 to 35 farmers
o Type B (51-120ha): 1 to 110 farmers
o Type C (>121ha): 3 to 50 farmers
• Land tenure will be secured.
• Agronomy packages were designed by IAM.
• Extensive training will be supplied (e.g. ICP, Agribusiness).
• Target best performing farmers and agricultural graduates.
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Project 5 - Development of Advanced and Commercial Cotton
Producers and Farmers
This is an income generating project:
• IAM would require US$ 3,040,000 for training costs, operating
costs and consultancies (setup costs).
• Different budgets per farmer but all are assessed as viable:
Elements
Break even
Cumulative cash flow over 10
years
IRR
NPV (at 10% over 10 years)
Type A
Year 4
Type B
Year 1
Type C
Year 1
US$ 812,847
US$ 1,222,168
US$ 3,472,847
21%
US$ 93,545
49%
US$ 438,357
96%
US$ 1,553,549
• Investment through private sector credit providers estimated at
a maximum of US$ 83,106,317 by year 10.
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Project 6 - Increase the capacity for land preparation (tillage)
Project implementation will provide the means to shift from
manual to draft animal and mechanized cotton production.
• Draft animal use will be expanded where appropriate. Several
regions of Mozambique already have the culture of using draft
power.
• The country’s agricultural machinery dealers will be encouraged
to import, test, select and supply the most appropriate
machines and implements.
• Machinery parks and mechanization contractors will be
established.
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Project 6 - Increase the capacity for land preparation (tillage)
This is an income generating project:
• IAM would require US$ 9,760,000 for training costs, operating
costs and consultancies (setup costs).
• Mechanization contractors (machinery parks) were evaluated:
o Capital expenditure of US$ 538,416;
o Cumulative cash flow after tax over 10 years is US$ 1,4 million;
o Breaks even in year 1;
o Internal Rate of Return (IRR) is 62.0%;
o Net Present Value (NPV) discounted at 10% over 10 years is US$
773,656.
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Project 10 - Development of Agrarian Insurance and a Mechanism for
Stabilization of Seed Cotton Price
Project implementation will result in the design and
implementation of an agrarian insurance model based on a
recently completed pilot.
• Minimize the loss of farmers’ income from climate and market
shock.
• Develop a risk management mechanism for cotton.
• Develop a price stabilization mechanism for the seed cotton
farm gate price.
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Project 10 - Development of Agrarian Insurance and a Mechanism for
Stabilization of Seed Cotton Price
This is a potential income generating project:
• The total budget for IAM over initial 3 years is US$ 5,010,000.
• Extensive further research is required before the private sector is invited
to engage:
o Climatic and market risks diagnosis and further training of the staff in
risk management mechanisms;
o Design and implementation of a national agrarian insurance model.
o Design and implementation of an effective price stabilization
mechanism for seed cotton.
o Active fundraising for the project and adjustment of the country’s legal
framework.
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Project 11 - Promoting Cotton Processing for Hospital Use
Project implementation will result in the establishment of a
cotton wool factory in the Dondo District (Sofala).
• Potential domestic and regional markets identified.
• Dondo identified as suitable location (e.g. Proximity to raw
materials and markets).
• Availability of labour identified.
• Access to specialized international technical support for
training and unit implementation to be identified.
• A full feasibility needs to be undertaken.
This is an potential income generating project:
• Potential investors need to be identified.
• Investment facilitation will be provided by Government.
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Project 12 - Promotion of Artisanal Textiles
This is a potential donor funded project.
Project implementation will result in the establishment of artisanal,
ginning, spinning, weaving and processing of cotton as well as the
pressing of cotton seed for oil and soap.
• Prepare feasibility study and contract experienced agencies to:
o Select and hire trainers;
o Import ginning, spinning and weaving equipment.
o Train cotton association members in craft processing.
o Facilitate access to credit.
o Facilitate selling crafted objects locally and regionally.
• Budget estimated at US$ 2,314,884 over 10 years.
• Estimated 100 artisans producing and selling crafts by year 3 and 500
by year 10.
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Project 14 - Financing Facilities for the Cotton Value Chain (Cotton
Financing)
Project implementation will create the facilities for fund raising,
fund allocation, and overall financial control and reporting
activities for program implementation.
• A permanent team within IAM Administration Department will
be created to ensure:
• Identification of all potential sources of funding at national and
international levels.
• Select and integrate all eligible activities into government annual budget
proposals.
• Identify all projects or activities that may be eligible for donor funding.
• Faciltation of access to credit and micro-credit for all CVCRS potential
entrepreneurs.
• Ensure that the funds are utilized correctly and adequately accounted
for.
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Project 14 - Financing Facilities for the Cotton Value Chain (Cotton
Financing)
This is a fund raising and fund management project.
• Project budget for 10 years is:
Elements
Operating Costs
Internal Audits
External Audits
Total
Total
US$
150,000
750,000
1,500,000
2,400,000
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Concluding Remarks
• The Programme Implementation document presents a “road map” for
the CVCRS.
• All projects are interconnected but the projects related to the research,
improved seed supplies and IAM capacity building are crucial to the
success of the program.
• The costing and economical feasibility of the projects were evaluated,
resulting in a positive assessment of the benefits that the total
investments will produce for the economy of Mozambique.
• Requirement for CVCRS implementation will be US$ 118,275,183.
• Private sector total credit requirement for all projects is estimated at
US$ 233,218,761.
• The contribution to GDP is estimated to be US$ 1.5 billion in the first 10
years of the project.
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Moçambique
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“Let’s revitalize the cotton industry”!
Thank You!
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