Inovation for Agribusiness Phase III Annual Report 2018

2018

InovAtion for Agribusiness Phase III Annual Report 2018

SUBMITTED TO THE SWISS AGENCY FOR INTERNATIONAL DEVELOPMENT AND COOPERATION

Table of Contents

Table of Contents ...... 0 Executive summary ...... 7 Conclusions and Lessons learned ...... 8

Section 1: Introduction ...... 9 Political Context Review ...... 11 Peace Negotiations ...... 11 Violent attacks in Cabo Delgado ...... 12 Elections ...... 13 Meticais Performance During the Reporting period ...... 14 Agriculture Sector Context Specific Issues ...... 15 National and Provincial Leadership – Ministry of Agriculture ...... 15 USAID Funded Agriculture Projects ...... 16 Rainfall in the Reporting Season ...... 16 Fall Army Worm ...... 18 Public Infrastructure ...... 19 Conclusions ...... 20 Section 2: Value Chain Analysis ...... 21 Project Outreach...... 21 Maize ...... 21 Pigeon Peas ...... 23 Soya Beans ...... 25 Groundnuts ...... 27 Sesame ...... 30 Conclusion ...... 32 Section 3: Inputs and Extension ...... 33 Partnerships during the reporting period ...... 35 Inputs Demand Activation and Extension ...... 36 Establishment of demonstration plots ...... 37 Realization of field days ...... 39 Realization of Agribusiness Fairs ...... 40 Input Distribution and Retail in the Project Locations ...... 42 Input Retail / Sales ...... 43 Fertilizer Distribution ...... 44 Distribution of Crop Protection Chemicals ...... 45 Employment Creation ...... 47 Lessons Learnt and Conclusion ...... 48 DRAFT WORK PLAN 2018 – 2019 ...... 49

Section 4: Enabling Environment ...... 50 1. Partnership with the National Seed Authority ...... 50 1. A. Finalization of the website ...... 50 1. B. Operationalization of the Database ...... 51 1. C. Operationalization of Private Sector Seed Inspectors ...... 51 2. Partnership with the APROSE ...... 56 2. A. APROSE Strategic Plan ...... 56 2. B. Governance of APROSE ...... 56 2. C. Service Delivery to Members ...... 57 Resource Mobilization ...... 57 Main Lessons Learnt and Conclusions ...... 58 Draft Work Plan 2018 - 2019 ...... 60

Section 5: Output Marketing ...... 61 Partnerships during the Reporting Period...... 61 Results achieved during the reporting period ...... 66 Output Procurement from smallholder farmers ...... 66 Capacity Building of CATs on Business ...... 68 Promotion of an Enabling Business Environment for Output Marketing ...... 69 Strengthening Ministry of Industry and Commerce capacity as a sector regulator...... 69 Debate on the future of the Pigeon Pea sector in Mozambique: ...... 69 Conclusion ...... 70 OVERVIEW OF WORK PLAN FOR 2018 - 2019 ...... 71

Section 6: Access to Finance ...... 72 Linkages with Formal Financial Institutions ...... 72 Deal Negotiations with GAPI ...... 72 Deal Negotiations with Letshego ...... 73 Deal Negotiations with BancABC ...... 73 Collaboration with Opportunity Bank ...... 74 Results ...... 74 Operationalization of the Fundo Agricola ...... 75 Expansion of the Fundo Agricola ...... 75 Development and Dissemination of the Fundo Agricola Manual ...... 76 Capacity Strengthening of the Co-Facilitators ...... 77 Formal Trainings of the Co -Facilitators ...... 77 Co-Facilitators exchange visits for sharing of inter-district learning ...... 77 Deepening of the Fundo Agricola ...... 78 RESULTS ...... 79 Main Lessons Learnt and Conclusions ...... 84

Work with Formal Financial Institutions ...... 84 Work with Savings Groups ...... 84 Draft Work Plan 2018 - 2019 ...... 86

Section 7: Land Tenure Security ...... 87 Activities and Results ...... 88 Community sensitization and capacity strengthening of structures...... 88 Land registration ...... 89 Lessons Learned and Conclusions ...... 90 Draft Work Plan 2019 ...... 91

Section 8: Knowledge Management and Project Results Measurement ...... 92 Development of the knowledge management strategy...... 92 Partnership with the University of Sao Tomas in Mozambique ...... 93 Partnerships with Community Radios in Erati and Alto Molocue ...... 93 Partnership with Aguacheiro Multi Media ...... 93 Monitoring and Results Measurement ...... 94 Development of the MRM Strategy ...... 94 Development of Intervention Guides ...... 94 Review of the Project Log frame ...... 94 Half Year and End of Season Survey ...... 94 Draft Work Plan for 2019 ...... 95

Section 9: Gender and Resilience ...... 96 Gender...... 96 Gender Assessment ...... 96 Strategy Development and Dissemination ...... 98 Resilience ...... 99 Partnership with the World Food Programme ...... 101 Conclusions ...... 102 Gender ...... 102 Resilience ...... 102 Draft Work Plan 2019 ...... 103 Section 10: Project Operational and Governance ...... 104 Project Staffing, Retention and Capacity Development ...... 104 Project Coordination Office in Maputo ...... 105 Financial Audit ...... 106 Strengthening project IT...... 106 Upholding Ethics for Good Practice ...... 106 Rolling out of the RFRS Accounting System ...... 106 Security Management ...... 107 Operationalization of TAMIS ...... 107 Draft Work Plan 2019 ...... 108 Section 11: Conclusion ...... 109

List of Figures Figure 1: Project Map / Outreach in 2018 ...... 10 Figure 2: Conflict locations in Cabo Delgado ...... 13 Figure 3: Meticais exchange rate to the US Dollar ...... 14 Figure 4: Mr. Pedro Dzucula – National Director of Agriculture ...... 15 Figure 5: Rainfall / Maize production stages and required management ...... 17 Figure 6: Signing Ceremony for the Project ...... 18 Figure 7: Lugona Bridge in Gurue ...... 19 Figure 8: Impala Beer ...... 22 Figure 9: Maize profit per hectare 2016 - 2018 ...... 23 Figure 10: Pigeon Pea Farm Gate Prices 2014 - 2018 ...... 24 Figure 11: Soy bean production and consumption trends in Mozambique (source: USAID Speed, 2016)...... 26 Figure 12: Average soya bean output grain prices ...... 26 Figure 13: Soya bean Average profit per hectare ...... 27 Figure 14: Male / Female Participation in Groundnut Production ...... 27 Figure 15: Groundnut crop in Erati ...... 27 Figure 16: Groundnut Value Chain Map 2018 ...... 28 Figure 17: Groundnuts Profit per hectare 2014 - 2018 ...... 29 Figure 18: Sesame Value Chain Map 2018 ...... 30 Figure 19: Sesame average yield per hectare in various countries ...... 30 Figure 20: Sesame output buying prices in project locations ...... 31 Figure 21: Sesame Average profit per hectare ...... 31 Figure 22: SEED Co breakfast meetings in Nampula and Maputo ...... 34 Figure 23: Investment in the Input Sector 2018...... 36 Figure 24: Phoenix Seeds exhibition stand at the Trade Fair in 2018 (Maputo) ...... 36 Figure 25: Demonstration Plots Per Crop ...... 38 Figure 26: Phoenix Seeds Demonstration Plot in Gurue ...... 38 Figure 27: Klein Karoo Field Day in Ribaue ...... 39 Figure 28: Market Access promotional adverts posted on Facebook and other promotional platforms...... 40 Figure 29: Nampula Province Governor opening Input Fair in Ribaue ...... 41 Figure 30: Klein Karoo Distribution Hub Opening in Mocuba ...... 42 Figure 31: Distribution of Ag. Input shops in project locations ...... 43 Figure 32: Volume of Seed Sales in project locations ...... 43 Figure 33: 2017 & 2018 Comparative Review of Seed Sales ...... 44 Figure 34: Volume and Value of Fertiliser Sales in project locations ...... 45 Figure 35: InovAgro Team Leader Visit to CureChem in Chimoio ...... 46 Figure 36: Volume of crop protection products sold in 2018...... 46 Figure 37: Agrodealer shop in Molombo selling various crop protection products...... 47 Figure 38: National Seed Authority Staff with Stakeholders in Chimoio ...... 50 Figure 39: Training of National Seed Authority Staff in Maputo ...... 51 Figure 40: Field work during Inspectors Training in Chimoio ...... 52 Figure 41: Licensed Inspectors showing their licences ...... 54 Figure 42: Director for IIAM congratulates one of the licenced inspectors ...... 55 Figure 43: No. of Old and New buying posts in the project locations ...... 66 Figure 44: Volume of output produce purchased per crop ...... 68 Figure 45: Dissemination of output marketing books in Molumbo and Gurue ...... 69

Figure 46: Pigeon Pea Workshops in Nampula and Mocuba ...... 70 Figure 47: Opportunity bank engaging with SHF at a field day in Gurue ...... 74 Figure 48: Pillars of the Fundo Agricola ...... 75 Figure 49: Input companies’ engagement with VSLA promoters ...... 78 Figure 50: Smallholder farmers participation in Fundo Agricola ...... 79 Figure 51: Smallholder farmers participation in FA per district ...... 80 Figure 52: Gender composition of the savings groups ...... 80 Figure 53: % proportions of accumulated savings ...... 81 Figure 54: Ceremony for award of delimitation certificates...... 87 Figure 55: Community sensitization meeting ...... 88 Figure 56: Meetings of Land and Natural Resources Management Committees ...... 89 Figure 57: Male Focus Group Discussion ...... 96 Figure 58: Partner Engagement Workshops ...... 98 Figure 59: Sample Insurance Seal...... 99 Figure 60: Maize growth stages covered by the index insurance ...... 100 Figure 61: R4 Methodology ...... 101 Figure 62: Project Organogram ...... 104 Figure 63: InovAgro and FSDMoz project teams in Maputo ...... 105 Figure 64: Training of the Ops team in Maputo ...... 106 Figure 65: PFU staff attending the global security training at the Nampula Office ...... 107

List of Tables Table 1: Main Report Sections ...... 9 Table 2: Project Outreach in 2018 ...... 21 Table 3: Partnerships with Input Companies ...... 35 Table 4: Demo Plots Log Frame Indicator ...... 37 Table 5: Demonstration Plots established in project Locations ...... 37 Table 6: Smallholder Farmers participating in field days ...... 39 Table 7: Participation Fees for Input Fairs ...... 40 Table 8: Input Fairs data Ribaue and Alto Molocue ...... 41 Table 9: Employment generation in inputs sector in the project locations ...... 47 Table 10: Candidates who participated in training in Chimoio ...... 52 Table 11: Facilitators for Inspectors Training ion Chimoio ...... 52 Table 12: Approved (licensed) candidates to operate as Inspectors ...... 53 Table 13: Scope of InovAgro support for APROSE in 2018 ...... 56 Table 14: Financial Mobilisation by APROSE during reporting period ...... 57 Table 15: Buying posts in project locations ...... 61 Table 16: Project partnerships with Output Marketing Actors in Nampula Province ...... 63 Table 17: Project partnerships with output marketing actors in Cabo Delgado ...... 64 Table 18: Project partnerships with output marketing actors in Zambezia...... 65 Table 19: Volume and Value of Output Purchased in Project Locations in 2018 ...... 67 Table 20: Financial Institutions engaged by InovAgro in 2018 ...... 72 Table 21: Smallholder Farmers receiving loans from formal financial institutions ...... 74 Table 22: Smallholder farmers participation in savings groups ...... 75 Table 23: Fundo Agricola Co-Facilitators in 2018 ...... 76 Table 24: Co-Facilitators Trainings ...... 77 Table 25: Co-Facilitators Learning Exchange Visits ...... 77

Table 26: Accumulated Savings as at 31 August 2018 ...... 82 Table 27: Projection of Seed Volumes to be purchased using Fundo Agricola ...... 83 Table 28: Road Map towards purchase of required inputs ...... 83 Table 29: Distribution of household’s plots for titling ...... 89 Table 30: Project Knowledge Management Partners ...... 92 Table 31: Research sample engaged during gender strategy consultations ...... 97

Executive summary

This first annual report from InovAgro Phase III reflects the project’s accomplishments over the first nine months and the results from the 2017-18 agricultural season. Phase III has maintained the momentum from Phase II, reaching or exceeding most of its output and outcome targets.

This year has seen a restructuring of the team, the recruitment of a new Deputy Team Leader, and the design of new strategies to enhance women’s economic empowerment and knowledge management to lay the foundation for the next three years. An expansion and deepening of Inovagro’s previous interventions are leading increasing rates of outreach and impact, while adding in new synergistic initiatives to accelerate the overall systemic impact.

InovAgro measures its impact on farmers in five core value chains (maize, pigeon pea, soya, groundnuts and sesame), reached primarily through cross cutting services such as output marketing, input and extension provision, and access to finance. Inovagro’s interventions assisted more than 5,000 new farmers to increase their incomes this year, bringing the total to 20,000 farmers while building sustainable systems to support them in the future.

Input supply activities continued to focus on demonstration of certified seed and improving distribution networks, working with 18 seed companies and top Agrodealers as lead partners. The input companies increased their numbers of demonstrations by 34 percent to 406. These partners sold 315 tons of seed, up by 20 percent over last year. Seed companies are deepening their exposure in the sector by investing in stronger distribution networks and Klein Karoo is investing in partnerships for local seed multiplication.

InovAgro focuses on community aggregators and traders (CATs) to drive output marketing, providing a trusted community level aggregation. Inovagro’s support to the 22 CATs has leveraged $590,000 in investments as they added 85 new buying posts this year to reach a total of 351. These, along with new technologies and management procedures, helped the CAT’s transact more efficiently, leading to a 100 percent increase in purchases to 11,120 metric tonnes of commodities worth more than $3,800,000 from smallholder farmers in our target regions.

InovAgro has collaborated with the provincial governments in the North as well as ministries at the national level to drive government engagement for internalizing the changes it is promoting in the economy.

The project raised awareness of the challenges of output marketing, establishing rules of conduct for output buying with the Ministry of Commerce and Industry and organized provincial and national seminars on output marketing of pigeon peas.

In the seed sector, InovAgro continued its work with the Ministry of Agriculture and the National Seed Agency launching the NSA website with seed information and supporting the certification of the first six private sector seed inspectors.

Support to APROSE continues helping them to secure 143,000 in grants, with another $133,000 in negotiations. With a recent change in leadership, APROSE is still facing capacity challenges, which will be a priority for InovAgro next year.

InovAgro adapted its extension model and tripled its outreach through the Fundo Agricola, adding 8,000 new members for a new total of 12,097 members. These participants are on course to save more than 8 million MZN ($133,000) by the beginning of the agricultural season (end of October) to purchase inputs, a 500 percent increase over last year. There is evidence of copying by other village savings and loan programmes, increasing indirect outreach.

In the formal financial sector, outreach to small farmers through normal formal financial channels has progressed slowly. Adapting its approach, InovAgro is experimenting with the introduction of agency banking and the provision of NANO-loans (30 day mobile loans) with BancABC which will accelerate outreach to farmers when they are operational next year.

Systems for securing land tenure introduced in Phase II are bearing fruit. Nearly 2,000 farmers, working through established community land management structures and a facilitating organization, are in the process of applying for DUATs in Nammarroi. The PFU anticipates that the processing of these DUATs will be finalized by the end of 2018. There is need to enhance stakeholder understanding (and acceptance) of the lower cost DUAT processing model which was developed by CTV which involves empowering community structures to conduct some roles (e.g. land registration and beneficiary boundary determination) that previously would have been performed by the SPGC technicians. In addition, InovAgro recognizes the need to strengthen smallholder farmer’s capacity to finance the processing of their DUATs through the established community structures. The land tenure security interventions in beneficiary communities are stimulating interest particularly in neighboring communities to adopt similar approaches. InovAgro will invest towards promoting exchange visits for neighboring communities and other organizations involved in land tenure security interventions to discuss the learning that will emerge from the current interventions.

Conclusions and Lessons learned Inovagro’s work continues to evolve, adapting new solutions to long standing challenges. As its exposure increases and it is one of the most trusted partners for ministries in the government and the private input and output companies seeking to develop sustainable business models. It is extremely well positioned to cement its successes and continue to drive innovation in the Mozambican agricultural sector.

InovAgro is providing evidence that systemic change drives expanded outreach and impact. Its work with the CATs, seed companies, and the VSLAs have highlighted that when you get the models right, they will be adopted by the market actors, copied and expand rapidly with just a little bit of prodding and guidance. InovAgro models are expanding beyond the project’s direct outreach.

One of the biggest challenges for a small, regional project is that Mozambique’s agricultural sector is fully embedded in global value chains, subject to changes in international and national political economy. The project has helped farmers contend with wide swings in exchange rates in Mozambique and in major trading partners, and changes in policies in end market countries, especially India, which shifted trade flows. Inovagro’s monitoring of international changes, and its ability to communicate this information to our partners, has enhanced Inovagro’s credibility and reliability as the partner of choice for firms and the government to work with, with impact extending well beyond the project zones.

Section 1: Introduction This report provides narrative details relating to the implementation progress for the Innovation for Agribusiness (InovAgro) project Phase III which commenced in January 2018. The details provided in the report cover the period January – September 2018. A half year report was provided to Swiss Agency for International Development and Cooperation (SDC) in May 2018 which covered the planting season from the end of Phase II. This report will focus on the results from the 2018 agricultural season, which cut across the two projects timeframes (end of 2017 and first half of 2018). Effort has been made to provide narrative data which complements the details that were provided in the submitted Half Year Report. This report has 11 key sections as indicated in Table 1 below: Table 1: Main Report Sections Scope of Content

Section 1: Provides a political economy review of the operational context and the implications of these Introduction developments on the delivery of the InovAgro project. Section 2: Value Chain Provides a review of key developments related to the value chains supported by the InovAgro project Assessments (maize, soya beans, sesame, groundnuts and pigeon peas). The implications of these developments in relation to smallholder farmers inclusion in each of the value chains are discussed. Section 3: Inputs and Provides a review of the project supported activities that have been conducted under this component. Extension The main results achieved during the 2018 agricultural season are presented as well as the main lessons learnt and conclusions. The draft work plan for the 2019 agricultural season is presented. Section 4: Enabling Provides a review of the project supported activities that have been conducted under this component. Environment The main results achieved relating to the work with the National Seed Authority (NSA) and the Association for the Promotion of the Seed Sector (APROSE) are presented as well as the main lessons learnt and conclusions. The draft work plan for 2019 is presented. Section 5: Output Provides a review of the project supported activities that have been conducted under this component. Marketing The main results achieved during the 2018 agricultural season (current volumes of output produce purchased from smallholder farmers, number of buying posts established by the project partners etc) are presented as well as the main lessons learnt and conclusions. The draft work plan for the 2019 agricultural season is presented. Section 6: Finance Provides a review of the interventions that have been carried out under this component and key results achieved including key learning emerging from the project interventions. The draft work plan for 2019 season is also presented. Section 7: Land This section reviews the implementation progress related to the land tenure security interventions. Tenure Security The main results and learning from this component are presented including the draft work plan for 2019. Section 8: This section reviews the implementation progress related to Knowledge Management interventions. Knowledge The main results and learning from this component are presented including the draft work plan for Management 2019. Section 9: This section will provide implementation progress on gender and resilience. Section 10: Project This section presents details related to project governance such as project Human Resources Management and Management, Asset Management and Financial Management. Coordination Section 11: Report Provides the conclusions of the report as well as the key learnings secured by the Project Facilitation Conclusion Unit during the reporting period. The position of the InovAgro project is discussed in relation to achievement of milestone targets agreed with SDC.

The project implementation during the reporting period remained concentrated in eleven districts in Nampula, Zambezia and Cabo Delgado provinces as indicated in Figure 1 below:

Figure 1: Project Map / Outreach in 2018

Political Context Review The InovAgro Half Year Report discussed at length the political situation in Mozambique, marked by the death of Mr. Afonso Dlakama, the RENAMO Party Leader; the subsequent appointment of Mr. Ossufo Momade as interim RENAMO leader; the terror attacks in Mocimboa da Praia and Palma in the Cabo Delgado province, and by-elections conducted in January and March to pick the new Mayor for the Nampula municipality, in replacement of the late Mahamudo Amurane who was murdered on October 4th, 2017. These details will not be repeated in this report but effort will be concentrated on detailing how the political situation has evolved in the last three months (May – September 2018). Peace Negotiations Some important milestones have been achieved in the last three months towards consolidation of the peace negotiations between the government and RENAMO. On the 20th of July 2018 - the Mozambican parliament passed electoral reforms which will now make it a constitutional requirement for provincial governors to be selected by the political party that wins the most votes in each region. The approval of these electoral reforms by Parliament effectively puts back on track municipal voting due to be held on October 10 20181. The approval of these reforms secured the decentralization of power that has been a sticking point in the peace negotiations between the Government and RENAMO.

The demilitarization of the RENAMO armed wing constitutes an integral part of the key actions linked to the peace negotiations. Under the deal that has been agreed by the parties in August 2018, the parameters that will guide how RENAMO militants will be disarmed, demobilized and reintegrated in society have been defined. Ossufo Momade, the interim leader of RENAMO has indicated that a commission will be established to receive weapons from the party fighters2. The effective integration of demobilized RENAMO militants in the army and police which had been an impasse at the core of longstanding disputes dating back to the Roma Peace Agreement of 1992 appears to have been resolved as President Nyusi recently appointed four members of RENAMO’s military branch to senior command roles within the national army and police force.

These political developments relating to the consolidation of the peace agreement between the Government and RENAMO have been applauded by the civil society as good news for Mozambique. The President of parliament, Veronica Macomo, described these developments as a “victory for the Mozambican people3” - an opportunity for creating a friendly and secure environment for investors to conduct their businesses and prosper. InovAgro Project Facilitation Unit considers the conclusion of these peace negotiations, if the agreed provisions are sustained, as representing positive prospects for the project public and private sector partners to fully contribute towards the implementation of the project supported interventions designed to promote inclusiveness in the supported value chains.

1 Disagreement over the disarmament of RENAMO rebel fighters - had threatened to delay the local elections as FRELIMO had refused to pass a new electoral law until RENAMO disarmed. 2 https://www.bloomberg.com/news/articles/2018-08-08/mozambique-s-renamo-says-fighters-to-be-integrated- with-military 3 Refer to https://www.news24.com/Africa/News/mozambique-passes-election-reforms-in-peace-progress- 20180720

Violent attacks in Cabo Delgado The security situation in the Cabo Delgado province appears to have relatively calmed down compared to the tension levels which characterized the first half of the reporting year4. Although the frequency of the attacks by Al Shabab seems to have reduced in the last three months – reports of continued harassment of villagers have continued particularly in the 2nd half of September 2018. For instance, reports were received that a village in the district of Macomia was attacked on Friday 7th of September 2018, while another in Mocímboa da Praia district had been attacked the previous Wednesday. An unidentified group of gunmen is reported to have set fire to the village of Ilala, in the administrative post of Mucojo, Macomia district at around 21:00hrs. The gunmen are reported to have doused houses with petrol and setting fire to them leaving dozens of houses destroyed in the attack5.

Text Box 1: Al Shabab Militia – Local Disgruntlement on Under Development in Cabo Delgado? Joseph Hanlon a regular writer on Mozambique political economy issues argues that although the events in Cabo Delgado have been noticed internationally – the response from central government has been unclear and in some cases inadequate to guarantee public safety and stability in the region. Hanlon (June 2018) argues that although several researchers have suggested that the Al Shabab group (Mozambique’s own version of Boko Haram) could be connected to a broader international Islamic terrorist network; the truth of the matter is that the militia groups are in fact a local phenomenon with very specific historical and social dynamics. Hanlon believes the Al Shabab militia emerged within a religious, social and ethnic group known as the Mwani who feel they have been marginalized for decades by migration into their area, a lack of economic development, and their neighbors’ political clout6.

Police in Nampula province are reported to have stopped 40 young men from Chalaua, Moma district, who had indicated that they were enroute to Cabo Delgado to work as sesame seed buyers. The Nampula Provincial police commander Mr. Manuel Zandamela indicated that these young men had been misled with offers of work when in fact they were being recruited by militants operating in Cabo Delgado.

InovAgro is operating in two districts in Cabo Delgado (Chiure and Namuno) (See Figure 2 below). Both districts have not been affected directly by these attacks but the negative perception that has been generated on Cabo Delgado as a province had the effect of generating a widespread environment of fear and anxiety, hence, affecting the perceptions of private sector companies (project partners) on the region leading to a slowing down (and/or freezing) of new investments which could have enabled the project interventions to progress more rapidly towards stronger crowding in of actors for service delivery to target smallholder farmers.

4 Numerous attacks on villages particularly in Mocimboa da Praia occurred during the period January – May 2018. Various stakeholders including the American Embassy were forced to review their travel policies to the region. The police announced in January 2018 that they had arrested over 300 people suspected of links to the Al Shabaab group which was believed to be at the center of these attacks. The group has been making demands typical of fundamentalists across the globe, calling for the imposition of sharia law, a ban on the sale of alcohol and removal of Christian crosses and secular monuments. 5 Refer to http://clubofmozambique.com/news/cabo-delgado-two-villages-attacked-in-three-days/ 6 Refer to http://clubofmozambique.com/news/cabo-delgado-attacks-continue-causing-panic-by-joseph-hanlon/

Figure 2: Conflict locations in Cabo Delgado

Elections Urban municipal elections are scheduled for October 10th, 2018.

The voter registration process for the upcoming municipal elections started on 17 March 2018 under the leadership of the Technical Secretariat for the Electoral Administration (STAE). This process has since been terminated on the 17 May 2018.

Full campaigns by the candidates vying for office is penciled to start officially from the 23rd of September and will run up to 8th October 2018. At present – it is expected that this process will be largely peaceful and the impact on the project activities is expected to be minimal. It is important that these elections be conducted in a peaceful environment to facilitation increased confidence for private sector investments in the region. Transparent elections will also generate increased confidence by the private sector of deepening accountability and respect for the rule of law – aspects which are deemed critical for sustainable business.

Meticais Performance During the Reporting period The performance of the Meticais on the market has been erratic during the reporting period. The Metical was under strong pressure during the first quarter of 2018. In January for instance, the Meticais declined from 58.75 to the US dollar on the 9th of January to 62.92 to the dollar on the 15th of March 2018, a swing of 7.1%.

Figure 3: Meticais exchange rate to the US Dollar

In the same vein, the Meticais fell from 4.78 to the South African Rand in mid-January to 5.28 on the 23rd of February 2018 (a loss of 10.5%). After mid-March, the currency started firming up again, clawing back most of the losses. This exchange rate volatility is challenging for commercial operators. Most project partners, particularly the seed companies engaged in importation of assorted seed products have continued to indicate that the instability of the Meticais makes it very difficult for their planning as commercial companies. The InovAgro PFU has noted an increased interest by seed companies (e.g. Klein Karoo, Oruwera, IKURU and new comers such as SEED Co) to multiply seed locally (to reduce imports) as a strategy to cushion themselves from the constant fluctuating effects of the Meticais7.

The substantial cuts on the Government expenditure budget, due to the declining levels of various donor’s direct budget support to the Government of Mozambique following revelations of the hidden debts will continue affecting the capacity of public services to deliver agriculture research and extension, seeds and plant protection services, rural roads maintenance, in addition to health and education (see further discussion below on public infrastructure). This may have negative implications for Inovagro's partners’ business operations. The reduced budgets from the center to provincial and district level government arms has also resulted in more frequent requests for support towards delivery of day to day operational activities of the Government in the project locations. These requests are expected to continue to persist in the foreseeable future and InovAgro PFU will need to carefully manage the resultant pressure from these requests to ensure that the project focus and implementation strategies are protected while maintaining good working relations with the authorities.

7 Klein Karoo has established partnerships with 3 Commercial Farms for local multiplication of seed. In Mocuba, the company has partnered with Mocotex Farm to facilitate multiplication of sesame over 15 Hectares. In Montepuez the company has engaged Plexus Farm for multiplication of sesame, cowpeas and sorghum seed over 120 Hectares. In Erati, the company has partnered with Jacaranda Farm for multiplication of maize seed over 20 Hectares. A total of 30 growers in Nampula have also been engaged to multiply groundnut seed over 80 hectares.

Agriculture Sector Context Specific Issues Several developments have occurred in the Agriculture sector during the reporting period which need to be flagged up by this report. These developments are general and are not value chain specific as the later developments will be discussed in detail under Section 2.

National and Provincial Leadership – Ministry of Agriculture Mr. Mohamed Vala who had assumed the role of National Director of Agriculture for close to 10 years was reassigned by the Minister of Agriculture to occupy new role as the role of Director for the Mozambique Cereals Institute (ICM)8.

Mr. Pedro Dzucula who had served as the Nampula Provincial Director of Agriculture has been elevated as the new National Director for Agriculture and Silviculture. His appointment was with effect from the 15th of August 20189. The appointment of Mr. Dzucula as the National Director represents a continued opportunity for the InovAgro as Mr. Dzucula is well informed of the project objectives, implementation approach and has engaged extensively with some of the project partners. Immediately upon his appointment, Mr. Dzucula attended a dinner meeting with the InovAgro management team in Maputo to discuss the planned work related to the project and to refine alignment of the project focus to national development priorities as defined by the Ministry. SDC participated in this meeting to ensure that the new Director was immediately updated of SDC country strategy in Mozambique, current and future implementation priorities in the sector. The new Nampula Provincial Director for Nampula, Mr. Jaime Roberto Chissico, has just been appointed and assumed office on the 1st of September 2018.

Figure 4: Mr. Pedro Dzucula – National Director of Agriculture

8 The Mozambique Cereals Institute (ICM) is responsible for regulating and promoting cereal production and commercialization in Mozambique. 9 Emphasis has been placed by the Minister of Agriculture and Silviculture that Mr. Pedro Dzucula should prioritise improving Mozambique agrarian results (particularly farm productivity) to be comparable to regional peers as well as improve Early Warning and Resilience Systems for the Ministry to be able to cope with distress in difficult years.

USAID Funded Agriculture Projects The USAID Mission in Mozambique has taken steps to terminate two of its agricultural projects as the United States Government implements budget cuts to previous provisions that had been allocated as support towards international development. The affected projects are:

A. The Feed the Future Mozambique Resilient Agricultural Markets Activity (RAMA) – Nacala Corridor This project had been launched on the 9th of May 2017 in Nampula and was being implemented by Winrock International10. The project had been established as a five-year initiative with total funding of US16 Million. It was intended to support producers in the Nacala Corridor to increase their productivity and profitability while building resilience. The project targeted work in 15 districts of the Nampula and Zambezia provinces. InovAgro has learned that this project will be closed by March 2019 and an exit plan has already been rolled out.

B. The Feed the Future Mozambique Improved Seeds for Better Agriculture (SEMEAR) This project had also been launched as a five-year initiative intended to promote dissemination of legume seeds as well as adoption of complementary crop management practices in Mozambique. The project was being implemented by a consortium led by the International Institute for Tropical Agriculture (IITA). The project was being implemented in Manica, Tete, Zambezia and Nampula provinces. The official close date for this project is yet to be confirmed although indications are pointing towards the first quarter of 2019.

The premature closing down of the above projects will reduce the complementary support that had been availed to InovAgro private and public sectors particularly in the seed sector. InovAgro will need to continue its close collaboration with the USAID INOVA11 project (and other related stakeholders e.g. SUSTENTA and PROMER) to ensure careful coordination and allocation of available reduced financial resources on priority interventions that can unlock sustainable inclusion and benefits for smallholder farmers in the supported value chains. Rainfall in the Reporting Season Smallholder farmers supported by the InovAgro project practice their agricultural production under rainfed conditions. As such, the quantity and distribution of rains each season, ultimately affects the crop performance of the supported farmers. The volume of rain received in all the project locations was sufficient to produce the crops that are supported by the project. In Zambezia province, Gurue received the largest amount of rain (2424.8 mm) followed by Ile (1971.2mm) and Namarroi (1.824.4 mm). Molumbo received the least amount of rain (470 mm). One singularity in the season is that the rainfall continued up to June as opposed to February/March, the usual end of the season. This may have benefited long cycle crops such as sesame and pigeon peas but posed serious risk of rotting to crops that mature early in the year such as maize, groundnuts and soya. In fact, the marketing of these crops was delayed due to excess of moisture in the grains. In Nampula province, Ribaue district received the most rains, a total of 2,451.8 mm followed by Malema district, 853 mm and Erati 786,4 mm.

10 Refer to https://mz.usembassy.gov/launch-new-feed-future-mozambique-rama-nacala-corridor/ 11 INOVA and SPEED have been kept by USAID at original approved implementation budgets and timelines. Both projects are being implemented by DAI.

Monthly rainfall figures in Zambezia Districts Monthly rainfall figures in Nampula Districts 600 700 500 600 400 500 300 400 200 300 mmof rainfall 100 200 0 100 0

Months

Malema Ile Gurue Molumbo Mocuba Molocue Ribaue Malema Erati

Figure 5: Rainfall / Maize production stages and required management

Fall Army Worm Reports of the Fall Army Worm were recorded in four locations supported by the project (Gurue, Malema, Ribaue and Erati). The fall army worm attacks in these locations were however not to the level of proportions recorded in 2017. The impact on yield in all the four locations is considered to have been minimal.

The Government of Mozambique has been stepping up efforts to ensure that the Government is better positioned to respond to future Fall Army Worm attacks. In this respect, on the 10th of August 2018, a tri- party MoU was signed by MASA, USAID and FAO to operationalize a US$5.6 million project to be implemented in 4 years aimed to help smallholder farmers in Mozambique to tackle Fall Army worm. The project is funded by USAID and will be implemented by FAO.

Figure 6: Signing Ceremony for the Project

The main activities that will be implemented under the signed agreement include research, technical assistance (extension), facilitation of access to technology, monitoring and supervision.

Public Infrastructure Public investment towards improving infrastructure (particularly the road networks) has remained limited during the reporting period. The central government budget allocations towards public infrastructure upgrades in the project locations remains weak and some serious advocacy initiatives are required if this situation is to be turned around. The limited investment in public infrastructure has been aggravated by the reduced support that the Government is currently receiving from international credit institutions such as the International Monetary Fund (IMF) following the fallout related to “secret loans”12. The large amounts of rainfall received in some locations particularly in Gurue has aggravated the poor condition of road networks rendering travel almost impossible or extremely difficult.

The poor infrastructure available in some of the project locations as indicated in Figure 6 continues to act as a deterrent for private sector investments. Product distribution (for instance production inputs) as well as bulking and collection of output produce is extremely difficult under these conditions. The work of extension officers who support smallholder farmers living in the affected communities is also restricted as more time and effort is required to be able to reach the farmers’ homesteads and their fields.

The costs related to maintaining vehicles and motorbikes is also increased due to rapid wear and tear arising from the harsh road conditions. This increases the transaction costs of doing business and reduces potential profit margins of the companies. In some cases, this cost is passed on to the farmers rendering the pricing of the services provided by the private sector actors to be beyond recommended levels.

Figure 7: Lugona Bridge in Gurue

12 Forensic investigators concluded that the Government of Mozambique had secured three secret loans amounting to $2bn - between 2012 and 2014 to fund a coastal protection project. A parliamentary commission of inquiry that was established in December 2016 determined that the government broke the law when it failed to seek authorization from the assembly to secure the funds as this violated the Constitution and budgetary laws. The government later explained the loans were used to fund military vessels and defence equipment and said it did not disclose the loans as a matter of national security. The scandal seriously damaged Mozambique's economy and international credit rating and this prompted an IMF and World Bank aid cutoff. The loans, which the government is unable to repay, were taken out in anticipation of a windfall from recently discovered natural gas deposits - but that income remains elusive.

Conclusions The following conclusions are derived from the discussion under this section:

1. The progress that has been achieved relating to the peace negotiations between the Government and RENAMO is encouraging. The strengthening of peace initiatives in the country create a conducive environment for business and it is hoped that the increased prospects for sustained peace in the country will attract more private investments for the development of an inclusive agribusiness sector. 2. The security situation in Cabo Delgado requires continued monitoring. Although the two districts (Chiure and Namuno) that are supported by InovAgro have not directly been affected by the reported attacks in the province, InovAgro as well as the project partners will need to maintain caution when operating in the province. 3. There are no indications that suggest that the upcoming municipal elections scheduled for the 10th of October will disrupt the normal delivery of the project activities. InovAgro hopes that these elections will be delivered in an environment of peace to ensure that the peace initiatives that are gaining momentum are sustained. Credible, transparent and peaceful elections are pivotal to enhancing investor confidence in the country – a crucial point to consider as InovAgro seeks to promote crowding in of more private sector actors in the delivery of its inclusive interventions. 4. The value of the Meticais has continued to fluctuate against the United States Dollar and the Rand. The exchange fluctuations have however not been as drastic as in previous years where levels reached levels as high as 75 meticais to the US$. 5. Management changes that have occurred within the Ministry of Agriculture and Silviculture at both National and Provincial levels will not compromise the project standing and acceptance by the Government of Mozambique. Infact – these changes are opportunities for the project as the new leadership has had a very close relationship with the InovAgro project in past years and the social capital that has been built over the years positions the project to engage the Government at a very senior level without much constraints. 6. The upcoming early termination of two USAID projects (RAMA and SEMEAR) will create support gaps to some partners that InovAgro is working with. InovAgro will need to engage closely with both SEMEAR and RAMA in the next months to ensure that their exit does not compromise some joint initiatives that had been initiated in partnership with InovAgro. As a mitigation action, the project will also continue its coordination with the INOVA project to ensure that the facilitation support that remains is best channeled towards critical support areas required to deepen the commercial activities, outreach and sustainability of the project partners. 7. Central budget allocations towards infrastructure development in the project locations have remained very low during the reporting period. Road maintenance remains poor and several bridges require service and repair. InovAgro must reinforce its partnerships with suitable partner(s) with adequate advocacy capacity and influence to lobby the government to create minimum conditions required for execution of business activities. If the central government continues to provide limited investments for development of public infrastructure in the project locations – the transaction costs related to doing business in the supported value chains will be very high thus limiting the sustainability of project private partners and income secured by target smallholder farmers.

Section 2: Value Chain Analysis This section provides details of the project achievements during the 2017/2018 agricultural season relating to smallholder farmer’s productivity and profitability for each of the five value chains supported by the project: groundnuts, maize, pigeon pea, sesame and soybeans. The agronomic performance of each these five crops in the project locations is discussed as well as specific market developments relating to each of the value chains. A conclusion to this section is also provided with key issues for current and future project consideration.

Project Outreach In the current agricultural season, InovAgro and its partners reached a total of 5,000 new smallholder farmers in addition to the 16,000 repeat farmers supported by the project from Phase II. These farmers were reached by the project through various interventions including field days, savings groups, participation in output markets and provision of extension services. Table 2 below provides an overview of the project outreach disaggregated per crop13 and gender.

Table 2: Project Outreach in 2018

No. of smallholder farmers reached by the project

Value chain Male Female Total

Groundnuts 2,831 1,679 4,510

Maize 4,373 2,594 6,967

Pigeon pea 3,618 2,146 5,764

Sesame 818 485 1,303

Soybean 1,542 914 2,456

Overall total 13,182 7,818 21,000

Percentage 63% 37% 100%

A total of 63% of the 21,000 smallholder farmers who participated in the five value chains were male and 37% were female. The majority participated in the maize (6,967 SHFs), groundnuts (4,510) and pigeon peas (5,764 SHFs) value chains.

Maize Maize14 continues to be the dominant crop in the project locations. The number of smallholder farmers who grew maize as their primary crop increased from 5,782 (during the last season) to 6,967 in the current season. The increased production of maize by the smallholder farmers is attributed to several factors such

13 This refers to smallholder farmers who grew the indicated crop as their main commercial crop. 14 InovAgro has partnered with the International Growth Centre to conduct a maize value chain study in the project locations. The PFU anticipates that the study will be completed in October and results will be disseminated to the project SAC during the Annual Planning Meeting including the updated Value Chain Map showing new actors participating in this value chain.

as new maize markets available to smallholder farmers in the project locations marketing efforts of the input companies of maize seed as well as the importance of the crop at household level both as a food security and cash crop. Although the volume of certified maize seed that was sold through the InovAgro supported input retail networks declined slightly this season compared to last season, from 195 metric tonnes to 141 metric tonnes, the PFU notes that maize seed remains the primary product that the seed companies are selling on the market.

Maize productivity per hectare increased during the reporting period from 876 KGs (during the last season) to an improved 1,145 KGs per hectare during the current season. The improved yield is attributed to various factors particularly the good rains received during this season, increased adoption of Good Agricultural Practices (GAPs) including the improved use of fertilizers in the project locations. Fertilizer use moved from a mere total of 45 metric tonnes during the last season to 112.7 metric tonnes during the current season15. The application of fertilizers particularly on hybrid maize seed varieties enhances crop performance and yield output16.

Although the volume of fertilizers used by the project beneficiaries improved during the reporting period (12kgs / hectare), the application rate per hectare remains below the average dose of 17kgs per hectare in most sub Saharan African countries17. Fertilizer application rate during the last season (2016 / 2017) was merely 5kgs per hectare.

The opening of new markets whose operations demand maize as a key raw material ingredient for their commercial products such the Cerveja Figure 8: Impala Beer de Mozambique18 to produce the increasingly popular Impala beer19

15 Focus group discussions conducted by the PFU during the End of Season Survey indicate that purchased fertilizer was used mainly for maize production with smaller amounts directed towards horticultural crops. 16 InovAgro promotes the responsible use of fertilizers on crops in line with Good Agricultural Practices and a respect to the need to protect soil health and the environment. The project acknowledges that maize is a heavy consumer of fertilizer and in the industrialized countries for instance, fertilizer demand for maize production is ranked second after potatoes. Refer to https://ageconsearch.umn.edu/bitstream/202592/2/Wp40-Maize-Revolutions-in-sub-Saharan- Africa.pdf 17 Refer to https://ageconsearch.umn.edu/bitstream/202592/2/Wp40-Maize-Revolutions-in-sub-Saharan-Africa.pdf

18 The brewing company Cerveja de Moçambique (CDM – Beers of Mozambique) has launched a new beer made from locally grown maize, Impala. The company expects that launching the new beer will create 3,500 jobs and generate 340 million meticais (about 5.6 million US dollars, at current exchange rates) in income for farmers. Most of the required maize is purchased from the Centre and the North of the country. The company indicated in 2017 that it expected to purchase 509,000 tonnes of maize annually to support its operations and argues that the new beer will support the commercialization of agriculture. The Ministry of Industry and Commerce projected in 2017 that Zambezia province would produce 650,000 tonnes of maize per year for the Impala beer. See for example http://clubofmozambique.com/news/zambezia-to-provide-maize-for-brewing/ 19 There are two types of Impala beer, one made from cassava and another made from maize. The maize Impala is very much in demand from revelers mainly due to product cheaper price and low alcohol content (3.5%) which is preferred by more cautious drinkers. The most important aspect of Impala beer, whether from cassava or maize, is that it is made from 100% locally produced products. CDM (a subsidiary of SAB-Miller) has negotiated a reduction in the taxes because it is not importing the components for the beer (unlike their regular production such as 2M)

opened new market opportunities for the smallholder farmers in the project locations. A new feed mill for the poultry industry has also commenced operations in Erati (Jacaranda) further strengthening the demand for maize during the current season20. The improved demand for maize during the current season resulted in an increased farm gate price of eight meticais per kilogram compared to last season’s disastrous four meticais per kilogram – which resulted in a negative average profit margin in 2017. For most of the smallholder farmers in the project locations, this year’s average price was a significant improvement compared to last season price and as such most smallholder farmers were encouraged to sell their output produce during the reporting period rather than hold on the secured output volumes in the hope of future price increases. Consequently, the volume of maize purchased from the smallholder farmers through the project supported output buying systems more than doubled from 2,416 metric tonnes (in 2017) to 5,852 metric tonnes in 2018.

Overall, the profit margin for Profit per Hectare for Manual Maize Farmers maize per hectare sitting at 2016 - 2018 US$79 was one of the lowest amongst the five crops 90.00 supported by the project yet 80.00 the crop remains one of the 70.00 most popular amongst the 60.00 supported farmers. The 50.00 importance of the maize crop 40.00 should therefore not purely 30.00 be evaluated from a financial

Amount in US$ 20.00 perspective but also from a 10.00 household food security - perspective as the crop (10.00) 2016 Season 2017 Season 2018 Season dominates the diet in the project locations. Figure 9: Maize profit per hectare 2016 - 2018

Pigeon Peas The PFU had anticipated that most smallholder farmers would abandon pigeon pea production during the current season, or at least dramatically reduce the area dedicated to this crop given the price collapse which characterized the previous season and reduced market activity by key actors in this value chain such as ETG.

20 Maize is mixed with soya beans to produce poultry feed rations.

Text Box 2: Pigeon Pea Export to India

The Indian company, the Export Trading Group (ETG), closed its factory in the central Mozambican city of Beira that was set up two years ago to process pigeon peas. According to media reports (e.g. Diario de Mocambique), ETG halted operations at the factory because it was no longer able to sell the product in the intended market, India. The decision had been taken in December 2017 and consequently the 100 workers in the Beira plant are at risk of losing their jobs. A memorandum of understanding on the export of pigeon peas was signed between India and Mozambique in 2016, during a visit to Maputo by Indian Prime Minister Narendra Modi. The deal was supposedly valid for five years but in August 2017, the Indian authorities imposed quotas on pigeon pea imports, moving this crop from the “free” to the “restricted” category of imports. The new rules state that only 200,000 tonnes of pigeon peas can be imported in any one fiscal year. Despite assurances from the Indian High Commission in Maputo that Mozambican producers would not be hit by these restrictions, in fact farmers found they were unable to sell all the pigeon peas they had planted in 2017 and the crops rotted in the fields. Mozambique has been allocated a pigeon pea export quota of about 100,000 tonnes a year. ETG is believed to have only exported a total of 40,000 tonnes to India in 2017 and still had 15,000 tonnes in storage (in 2018) in its warehouses in Beira, Nampula and Nacala.

Contrary to the project projections that the number of smallholder farmers participating in this value chain would decline, only a marginal decrease was recorded during the current season as a total of 5,764 smallholder farmers grew pigeon peas as their primary commercial crop compared to last season’s 5,965 smallholder farmers. Female pigeon pea farmers however reduced their investment per hectare from last year’s average of 2,936 meticais to a current of 2,285 meticais during this season. Despite the reduced investment per hectare, the favorable rains recorded during the current season are attributed towards the increased average yield per hectare of 743 kgs compared to last season’s 612 kgs.

The pigeon pea prices however Pigeon Pea Farm Gate Prices (2014 - 2018) remained unlucrative this season as the farm gate price 40 paid for a kilogram of pigeon 35 peas was only eight meticais, an 30 increase on the five meticais during the last season, but still 25 uncompetitive to facilitate 20 genuine commercialization of 15 smallholder farmers in the project area which would result 10 in sustainable incomes.

Price per kilogram in in Meitcais perPrice kilogram 5 0 2014 2015 2016 2017 2018

Figure 10: Pigeon Pea Farm Gate Prices 2014 - 2018

The depressed pigeon pea prices have reduced significantly the smallholder farmers profitability from a peak net profit of US$167 per hectare in 2016 before the market collapse to US$45 per hectare during the current season. These developments in the pigeon pea sector during the past two seasons reinforce the fact that Mozambique is embedded in global value chains and the performance of the country’s agribusiness sector is increasingly dependent on the production trends and policies enacted by other countries. The policies enforced by the Indian Government in this instance relating to pigeon pea imports into the country since 2017, as explained in the text box above, have generated significant uncertainty on the local markets and price volatility which has significantly compromised the profitability of smallholder farmers in the project locations.

Text Box 3: Entry of the Royal Group Lda on Pigeon Pea Market

A key development during the reporting period is the entry of a new company, Group Royal in pigeon pea output trading in the project locations. The company purchases pigeon peas from all project locations and exports to India (same business model as ETG). The entry of Group Royal on the market will now cut out the monopoly that had long been enjoyed by ETG as the main exporter of pigeon peas in the country. The Royal Group has recently created a foundation (working in partnership with SUSTENTA) that focusses on provision of extension to smallholder farmers.

The in-country allocations of volumes that each company can export to India are currently being determined and controlled by the Government through the Ministry of Industry and Commerce. This is being done through the provisions of quotas to companies willing to export the crop to India. This process has been shrouded by allegations of corruption, inadequate transparency and is the main controversy now at the center of the sector’s operations in the country. This is discussed in more detailed in Section 5 under output marketing.

Soya Beans Soya bean is traditionally not consumed by Mozambicans as a food crop despite its high protein content. The major end markets are animal feed companies (primarily poultry feed) as well as exports to Malawi (for feed). The soya beans domestic demand for processing into feed is estimated at 75,000 MT/year. Thirty (30%) percent of feed demand in the country is linked to the commercial activities of one company, Abilio Antunes in Manica. In Nampula, Novos Horizontes and Proalimentar are the prominent feed companies. The domestic market for soya is estimated to be growing at about 20 percent per year (thus presenting a market opportunity for smallholder farmers in the project locations). The projections made by USAID SPEED (2016) indicate that soy bean production will continue to fall short of growing consumption requirements as indicated in Figure 11 below:

Figure 11: Soy bean production and consumption trends in Mozambique (source: USAID Speed, 2016)

A total of 2,456 smallholder farmers (1,542 male and 914 women) in the InovAgro project locations grew soya beans as their main commercial crop during this season supported through the project facilitation systems. This represents a marginal increase compared to the 2,395 small holder farmers who grew soya beans as their primary cash crop during the previous season (2017 / 2018)21.

Average Soya bean Output Grain Prices for past 5 years in project locations 25

Average Price per Kilogram meticais Kilogram in Average per Price 0 2013 / 2014 season 2014 / 2015 season 2015 / 2016 season 2016 / 2017 season 2017 / 2018 season

Figure 12: Average soya bean output grain prices

The average farm gate price of 21 meticais per kilogram of soya bean grain was lucrative for smallholder farmers in the project locations. Manual soya bean producers increased their farm profitability per hectare to an encouraging US$272 compared to a reduced US$111 recorded during the last season.

21 The reduced market prices for soya bean grain experienced during the previous season (the lowest over the past five years) acted as a disincentive for many smallholder farmers to participate in the value chain during the current season as the risk of price uncertainty was considered too high.

Average Profit Per Hectare for Manual Soya Bean Producers 350

300

250

200

150

100 Amount i US$

0 2014 Season 2015 Season 2016 Season 2017 Season 2018 Season Figure 13: Soya bean Average profit per hectare

Groundnuts Male / Female Participation in A total of 4,510 smallholder farmers grew groundnuts as their primary cash crop in the Groundnut Production InovAgro project locations during this reporting 3000 period. This represents a significant increase of 3,404 smallholder farmers compared to the 2500 1,106 smallholder farmers who grew the crop 2000 during the last season. While the groundnuts 1500 value chain has long been considered by the InovAgro project to be a female dominated 1000 cash crop, the results secured from the last No. Farmers of 500 three End of Season Surveys indicate growing involvement of male farmers in groundnut 0 production – even surpassing the levels of 2014 / 2015 2015 / 2016 2016 / 2017 2017 / 2018 season season season season female farmers. Male Female

Figure 14: Male / Female Participation in Groundnut Production

InovAgro therefore notes that as the groundnut value chain becomes more commercially oriented, an increased number of male smallholder farmers are gaining interest in this cash crop. The average size of the land that male farmers allocated towards groundnut production during this reporting period (1.05 Ha) was much bigger compared to the female

Figure 15: Groundnut crop in Erati

average land size of 0.77 Ha22. The average investment per hectare made by groundnut male farmers of 3,744 meticais was significantly higher than the average female investment of 2,858 meticais. The average male yield output per hectare registered for this season (857 kgs) is much higher than the 542 kgs yield per hectare secured by female farmers. These results indicate that the long-held project view that groundnuts is a female dominated crop at the production level needs to be reviewed.

Most of the groundnuts produced in the project locations are targeted for the domestic informal markets – with strong inter regional trade mainly to Maputo (Southern Region). Limited volumes of groundnut produce are also exported to regional countries mainly South Africa23.

Figure 16: Groundnut Value Chain Map 2018

22 While the larger area allocated by the male farmers towards groundnuts production can be interpreted as confirmation of the economic potential that they see in groundnuts as a cash crop – female farmers in previous Focus Group Discussions argued that this was also indicative of reduced labor capacity by female farmers to open larger pieces of land to expand their production activities. 23 IKURU secured a contract to supply groundnuts to South Africa during this season. The company is in the process of finalizing export logistics including aflatoxin tests.

Profit Per Hectare for Groundnuts Farmers 2014 - 2018 500 450 400 350 300 250 200

Amount in USD 150 100 50 0 2014 Season 2015 Season 2016 Season 2017 Season 2018 Season Figure 17: Groundnuts Profit per hectare 2014 - 2018

The price of the groundnuts increased slightly from an average of 35 meticais (last season) to 38 meticais during the reporting period. Smallholder farmers who engaged in groundnut production managed to achieve a profit margin of 88% in relation to their investment. This increased profitability is also attributed to improved yield per hectare from 625 kgs per hectare (last season) to a current yield of 769 kgs per hectare. As such, groundnuts remain one of the most lucrative crops supported by the project.

InovAgro is also encouraged by the entry of the Group Royal company in the groundnut value chain as a large buyer of the commodity. This company has potential to fill in the market gap that had been created by the exit of CARGILL from the market in 2016. Potential international buyers, particularly Twin Trading, continue to express interest in sourcing groundnuts from Nampula and Cabo Delgado provinces for export to the United Kingdom and other European markets. This interest is on the back of the company failing to secure sufficient produce volumes in Malawi and increasingly Mozambique is considered a potential supplier of the required produce volumes if an elaborate system that controls aflatoxin contamination can be established. The Groundnut Working Group, led by IKURU, is driving efforts within the sector to explore mechanisms how aflatoxin contamination levels can be reduced to meet the requirements of international markets.

Sesame Sesame remains a key crop that is grown by the smallholder farmers in the project locations primarily for export to Europe and Asia.

Figure 18: Sesame Value Chain Map 2018

The End of Season Survey Sesame Average Yield Per Hectare conducted by the PFU demonstrates that the number of smallholder farmers who grew Tanzania sesame as their main commercial crop during this reporting period Uganda increased from 752 (last season) to 1,303 farmers this season (818 male and 485 female). The average Egypt yield per hectare recorded this season in the project locations of Mozambique Country Average 569 kgs per hectare24 is slightly higher than the country average Project Locations yield of 510kgs per hectare but lower than the achievement 0 200 400 600 800 1000 1200 1400 1600 secured in most regional countries VOLUME / IN KILOGRAMS such as Uganda and Tanzania. Oruwera, JNB and IKURU were the Figure 19: Sesame average yield per hectare in various countries main suppliers of sesame seed in the previous season.

24 Yield per hectare during the last season was 516 KGs

More companies (Klein Karoo and Phoenix Seeds) supplied sesame seed during the reporting period prompting a spike in sesame seed sales from last year’s 9.14 metric tonnes to an encouraging 30.8 metric tonnes during this reporting season25. The increased sesame seed sales are attributed to improved distribution and supply by the seed companies during the current season.

The average buying price for Sesame buying prices in the project sesame in the project locations locations was 63 meticais / kilogram. This high price made sesame the most 70 lucrative crop for smallholder 60 farmers in the project locations 50 with a net profit of US$566 per hectare. This is the highest profit 40 margin to be achieved by sesame 30 growers in the project locations 20 since 2014. 10

Price per kilogram (meticais) per kilogram Price 0 2013 / 2014 2014 / 2015 2015 / 2016 2016 / 2017 2017 / 2018 season season season season season

Figure 20: Sesame output buying prices in project locations

Profit Per Hectare for Sesame Farmers 2014 - 2018

600 500 400 300 200 Amount in US$ 100 0 Season 2014 Season 2015 Season 2016 Season 2017 Season 2018 Figure 21: Sesame Average profit per hectare

InovAgro PFU anticipates that the high profit margin secured by sesame growers during this season will encourage more growers to produce the crop in the coming season and there are strong chances that more male farmers will participate in this value chain26.

25 Refer to section 3 of this report for more discussion 26 Scientific Research indicates that male participation in a value chain increases when the value chain becomes more commercial and profitable rather than subsistence.

Conclusion The following are the main conclusions reached by the PFU in relation to the 5 value chains supported by the project:

1. Smallholder farmers in the project locations continue to switch from one crop to the other depending on the market prospects that they see in each of the value chains. Despite the gloom at the centre of the pigeon pea value chain attributed to the import restrictions imposed by India, smallholder farmers have continued to grow the crop. Pigeon Pea value chain had the second highest number of farmers after maize. InovAgro PFU has also noted the increased numbers of farmers partipipating in the groundnuts value chain (including a significant percentage of male farmers). This has mainly been attributed to the high market prices offered for groundnuts during the previous two seasons. It is important for InovAgro to strengthen partnerships with market actors who can facilitate disemination of market information (prices, scope for potential uptake etc) to ensure that the smallholder farmers in the project locations make informed decisions regarding their investment options. 2. The increased maize productivity during this season is encouraging but the crop profitability per hectare is depresssed due to low prices offered by the market. The low market prices have been attributed to large volumes of product which were on the market particularly from last year harvest which the smallholder farmers had not sold due to unattractive market prices. Furthermore, regional trade allowing for imports from South Africa and in some cases from Malawi has had implications in terms of price setting. The importance of the maize crop in the supported smallholder farming systems should however not be examined purely from a financial lens. The importance of maize as a food security crop in the project locations has to be acknowledged and continued support for this crop should be established on that basis. 3. Pigeon pea profitability continued to be depressed by the low market prices linked to the India market uncertainity since 2017. The net profit achieved by smallholder farmers below US$50 per hectare is unencouraging and it remains unclear if the market impasse with the Indian authorities will be resolved in the near future. InovAgro PFU should strengthen its partnerships with actors who can provide timely insights to the smallholder farmers on what is profitable to enable the farmers to make informed investment decisions and where required to enable them to diversify their market risk. 4. Soya bean, Groundnut and Sesame performance during this season were encouraging as the achieved profit levels per hectare are deemed as capable for transforming household livelihoods. InovAgro considers these three crops during this season as the golden crops. 5. The entry of the Royal Group company in output trading in the project locations for procurement of maize, sesame, pigeon peas and groundnuts has brought required new energy on the market and increases chances for required positive competition with ETG which for long had dominated the pigeon pea value chain as the sole experter of the produce to India. The current arrangements which involves government regulation and dominance in the allocation of qoutas to private sector companies to secure export permits of pigeon peas to India acts as fertile ground for corruption and limits the space for private sector actors within and outside Mozambique to engage freely on commercial terms on a competitive basis. Some advocacy work is required and the Pigeon Pea workshops that have been conducted by InovAgro in Nampula and Mocuba during the reporting period are examples of platforms through which some of the advocacy messages can be disseminated to authorities by the value chain actors.

Section 3: Inputs and Extension This section of the report provides discussion of the implementation progress relating to the inputs and extension component. The vision of InovAgro Phase III is a vibrant inputs and extension market system characterized by competing private sector companies providing a wide array of quality input products (certified seed, agrochemicals, fertilizers and related farm implements) as well as extension services to smallholder farmers in the project locations.

The discussion under this section has been categorized in three parts as follows: Part A: Overview of partnerships implemented by the InovAgro project during reporting period. Part B: Discussion relating to inputs demand creation and extension activities by the project partners Part C: Discussion relating to input distribution and retail activities by the project partners.

Prior to a full discussion on the above – there are several highlights / key developments relating to the agricultural inputs sector in Mozambique which must be pronounced upfront to set the scene for the subsequent report details:

1. Mr. Ismenio Chitata – long time Country Director for PANNAR Seeds in Mozambique left the company on the 30th of June 2018. At the same time, Mr. Temba Nkathazo – PANNAR Seeds Director for Zimbabwe who also assumed oversight responsibility for the company Mozambique operations left the company in May 2018. Mr. Caiphas Muyambo has been appointed by the company board as the Head of PANNAR Seeds operations for Zimbabwe, Mozambique and Malawi. Caiphas has a long working relationship with the InovAgro project dating back to 2015. The position of a full time Country Director in Mozambique has been made redundant and instead the company will be engaging a Territory Sales Manager to be based in Chimoio but with 50%-time allocation towards developing the market in Northern Mozambique. 2. Mr. Peter Waziweyi – owner and founding Director for Sementes Nzarayapera has been sick for a while. The company is a family run business and at present most attention has been focused on securing Peter’s recovery. Sementes Nzarayapera, like most family run businesses (including some CATs) needs to broaden its personnel base to minimize operational dependence on the family members. 3. There has been increasing talk of government plans to revive SEMOC27. It is still not clear whether these plans are genuine and supported by concrete political commitment. The business model that the company would take if the plans are implemented is also yet to be understood. InovAgro has intelligence that some engagement with Mr. Celso Ruface has occurred to explore possibilities of him assuming the company Directorship to steer the revival of the company. InovAgro will continue to monitor the developments and determine if this represents an opportunity to further strengthen the project interventions particularly on certified seed supply, distribution and retail. 4. SEED Co officially launched its return to the Mozambican market in May 2018 after months of protracted negotiations with the InovAgro PFU. The company conducted two launch events in Nampula and in Maputo and used these platforms to engage with the sector stakeholders explaining their plans in Mozambique and the investments that the company would be rolling out to re-establish their presence on the Mozambican market. The re-entry of SEED Co on the market has been defined as a game changer in the seed sector by most sector stakeholders. Most stakeholders acknowledge SEED

27 SEMOC was previously one of the biggest seed companies in the country. The Government of Mozambique was the majority shareholder. The company closed in 2008 after experiencing viability challenges.

Co’s experience in the sector based on its experience in more than 17 African countries. At the same time, there are some historical reputational perceptions that the company will have to deal with in the short term to protect the integrity of the company brand image.

Picture Gallery – Launch of SEED Co in Mozambique

Figure 22: SEED Co breakfast meetings in Nampula and Maputo

Partnerships during the reporting period The InovAgro project established partnerships with a total of 18 companies during the reporting period as detailed in Table 3 below:

Table 3: Partnerships with Input Companies

Financial Contribution Partner (USD) Scope of the Signed Partnership Partner InovAgro

Klein Karoo 24,800 14,650 ✓ Opening a distribution hub in Mocuba; demand creation activities and extension provision in the project locations Phoenix seeds 50,600 15,780 ✓ Opening a distribution hub in Molocué, extension and expansion of retail network. Casa do 38,000 4,600 ✓ Training of agro dealers, sell of inputs and branding of 2 agro Agricultor dealers shops PANNAR 48,500 19,950 ✓ Launch of Corteva brand; demand creation; expansion of retail network. Mutiana 8,006 6,412 ✓ Opening of a one-stop shop in Erati district; demand creation; and Investimentos extension provision to SHF CureChem 13,750 5,650 ✓ Establish a network of product distribution outlets through strategic Agrodealers Ikuru 19,116 12,266 ✓ Opening a shop in Ribaué district; demand creation and extension. 5 Agro 13,346 7,358 ✓ Sell of inputs through village based fairs dealers Agri Con 5,639 2,670 ✓ Opening a shop in Molumbo district; distribution of CureChem products; demand creation; and provision of extension services to SHF. MMB 7,888 5,921 ✓ Opening of shops in Chiure and Namuno; demand creation; and provision of extension services to SHFs. Aulado 2,667 2,250 ✓ Opening a shop for input sales in Mugulama -Ile district –demand Consultoria creation and provision of extension services SHFs. Agro Trading 3,742 3,150 ✓ Opening a shop for input sales in Ile district; demand creation and provision of extension services SHFs. Seed Co 219,735 31,125 ✓ Establish a network seed distributors; demand creation; provision of extension services to the SHFs. Market 4,500 10,500 ✓ Realization of agribusiness fair in 5 project districts Access TOTAL 460,289.00 142,282.00

The project invested a total of US$142,282.00 during the reporting period to vitalize the private input companies’ capacity to provide services to the smallholder farmers in the project locations. The investment made by the InovAgro project further unlocked a total of US$460,289.00 investment from the partner private sector companies.

Investment in the Input Sector 2018 SEED Co has contributed the most investment during the reporting season. This is attributed to the large costs associated with the re-establishment of the business in the country. The large capital injection by SEED Co28 is also potential signal of the company’s genuine commitment to re-establish their presence on the Mozambican market.

Partners Co-Investment InovAgro Investment

Figure 23: Investment in the Input Sector 2018

Inputs Demand Activation and Extension Demand activation to stimulate the purchase and use of quality production inputs remained at the core of the interventions implemented by the project working with the above-mentioned partners. During the reporting period, InovAgro noted with encouragement the fact that companies such as Klein Karoo, PANNAR Seeds and Phoenix Seeds are increasingly becoming more innovative in the strategies that they employ to activate demand for their products. Apart from the establishment of demonstration plots and realization of field days - some of the strategies that the companies have embraced include TV and radio campaigns, road shows, use of social media particularly WhatsApp, dissemination of tailored messages through music and participation at various trade fairs at district, provincial and national levels.

Figure 24: Phoenix Seeds exhibition stand at the Trade Fair in 2018 (Maputo)

28 Indicated capital injection is until March 2019. SEED Co new financial year starts in April of each year. InovAgro supported SEED Co to design their market re-entry strategy primarily through the realization of breakfast meetings in Nampula and Maputo. InovAgro also provided SEED Co with intelligence on key actors on the markets and arranged meetings for the company to re-engage with these actors. The current deal focusses on helping the company to establish a network of distributors as well as promote demand activation through farmer engagement meetings and field days.

Establishment of demonstration plots A total of 406 demonstration plots (demo plots) were established by various input companies in the project locations during the reporting period. This represents an increase of 35% up from 299 demo plots that were established by the companies during the 2016/2017 agricultural season.

Table 4: Demo Plots Log Frame Indicator

Log frame Indicator Target Milestone Actual Achievement Target 2018 2018 No. of demonstration plots established for stimulating input 403 406 demand by smallholder farmers

Eight input companies were involved in the establishment of the demonstration plots as indicated in Table 5 below: Table 5: Demonstration Plots established in project Locations

Company 2016/17 2017/18 PANNAR Seeds 109 51 Phoenix Seeds 106 168 Klein Karoo 7 84 Syngenta 27 33 Oruwera 17 10 JNB 17 19 IKURU 13 18 Sinergia Moz - Agrodealer 3 0 Sementes Nzarayapera 0 23 TOTAL 299 406

Phoenix Seeds established the most number of demonstration plots during the reporting period. Most companies remained interested in maize seed promotion with a total of 248 demonstration plots (out of the 406 demos) established being for the maize crop29.

29 InovAgro has noted that the although seed companies continued to promote maize seed as their primary commercial product, the number of maize demonstration plots during the current season decreased in relation to the previous season. This has been attributed to the company strategies to allocate resources towards promotion of other crops such as sesame and groundnuts. The number of established demonstration plots increased significantly during the reporting period.

Comparative Review of # of demonstration The market uncertainty plots established in the project locations related to pigeon peas arising from lack of India 300 market assurances for the output crop resulted in less 250 acceleration of pigeon pea 200 seed promotional activities 150 with a 10% reduction in the 100 number of pigeon pea 50 demos registered this year compared to the previous 0 Maize Sesame Pigeon Peas Soya Beans Groundnuts season levels.

# of # demonstration plots established Previous Season Current Reporting Season

Figure 25: Demonstration Plots Per Crop

Figure 26: Phoenix Seeds Demonstration Plot in Gurue

The lucrative prices for sesame and groundnuts during the previous season increased smallholder farmer’s interest in the two crops during this season. The seed companies responded swiftly by stepping up their promotional activities for both crops as noted by the increased number of demo plots established during the current season for the two crops.

Realization of field days Private sector partners continued to invest in the realization of field days during the reporting period. The field days continued to be the main vehicle for dissemination of extension messages to target smallholder farmers and product demand activation based on the performance of established demonstration plots.

A total of 101 field days were conducted during the reporting period with a total outreach of 12,162 SHFs.

Table 6: Smallholder Farmers participating in field days

Log frame Indicator Target Milestone Actual Achievement Target 2018 2018 Number of SHFs participating in field days facilitated by the 12,000 12,162 project

Klein Karoo Seed Marketing attracted the biggest numbers of participants during the field days that were conducted. The company strategy revolved around conducting strong mobilization of the SHFs to attend these events. Furthermore – the company also targeted school children to participate in their field days recognizing the power of the youth as future farmers and their capacity to influence the investment decisions made by their parents at household level in choosing the technologies that they use for their production activities.

Figure 27: Klein Karoo Field Day in Ribaue

Realization of Agribusiness Fairs InovAgro established a partnership with an event management company in Nampula – Market Access. The company has taken over all the logistical organization and event promotion activities related to the realization of Input Fairs in the project locations30. To ensure the commercial sustainability of this initiative, the company developed a cost structure for fees charged to commercial stakeholders who wish to participate and market their products through the input fairs.

Table 7: Participation Fees for Input Fairs

Stakeholder Participation Fees Charged by Market Access SME companies 2,000 meticais Farmer Associations 2,500 meticais Large Corporates 5,000 meticais

The partnership with Market Access will facilitate realization of a total of 5 Agribusiness Fairs in 2018 in Ribaue, Malema, Gurue, Mocuba and Alto Molocue.

Figure 28: Market Access promotional adverts posted on Facebook and other promotional platforms

At the time of writing this report – a total of two fairs had already been conducted in Ribaue and Alto Molocue at the time of writing this report with some encouraging results particularly in Ribaue as shown in Table 8 below:

30 During InovAgro Phase II – The project had undertaken this role as an interim arrangement. The PFU has now handed over this function to a market actor who is providing the service on commercial terms to guarantee long term sustainability of the initiative.

Table 8: Input Fairs data Ribaue and Alto Molocue

Location Ribaue Alto Molocue Event Dates 11 – 12 July 2018 06 – 07 September 2018 No. of Exhibiting Companies 26 18 No. of smallholder farmers who 1,300 1,010 attended event Estimate value of transactions traded 2.000.000 33.500 during the fair (Meticais)

These fairs31 have attracted the attention of senior government officials as the Governor of Nampula, The Minister of Agriculture and Silviculture and the Minister of Industry and Commerce attended the Ribaue event and commended the initiative as a sustainable vehicle for linking smallholder farmers with the private sector companies to share information on products and services available on the market to transform smallholder farming into commercial enterprises.

Figure 29: Nampula Province Governor opening Input Fair in Ribaue

31 InovAgro is currently assessing the performance of this intervention including the operational costs and profitability of the operations. The results from this assessment will be shared during the Annual Planning Meeting.

Input Distribution and Retail in the Project Locations The project worked with a total of 9 seed companies during the reporting period for seed distribution and retail. These seed companies established distribution relationships with a total of 19 Agrodealers who actively sold seed to smallholder farmers in the project locations. A total of 8 new shops32 were opened during the reporting period bringing the Agro-input outlets operating in the project locations to a total of 40 shops.

Figure 30: Klein Karoo Distribution Hub Opening in Mocuba

All the 11 districts supported by the project had at least one input shop from which smallholder farmers could purchase required inputs. The highest concentration of shops was recorded in Nampula, Alto Molocue, Malema, Gurue and Ribaue as indicated in Figure 31 below.

32 The shops were opened in Chiure, Erati, Mocuba, Molumbo, Ribaue, Namuno, Ile and Nammarroi.

Figure 31: Distribution of Ag. Input shops in project locations

There are several factors that explain the above distribution of the agri-input shops in the project locations. For instance, most private sector companies prefer to locate their shops in centers where access to basic services such as electricity, water and transport networks are functional. Furthermore, locations that have better agroecological conditions such as Gurue attract more investments.

Input Retail / Sales

SEED SALES VOLUMES IN A total of 315,88 metric tonnes of assorted PROJECT LOCATIONS seed was sold through the established distribution network during the reporting period. These inputs were purchased by Last Season 17,360 smallholder farmers during the reporting period33. Maize seed continues to be the main cash Current Season cow for seed companies with a total of 140 metric tonnes having been sold during the 250 260 270 280 290 300 310 320 reporting period. Volume of Seed Sold (Metric Tonnes)

Figure 32: Volume of Seed Sales in project locations

33 InovAgro PFU provided the Agrodealers with templates on which they recorded the names of customers that were purchasing the seed.

InovAgro also noted the phenomenal growth in sales volumes for horticulture seed as captured on Figure 33 below as “other crop”. In fact, the promotional activities conducted by InovAgro under its interventions have allowed horticulture seed demand activation to be conducted in parallel to the cereal and pulses supported by the project.

Volume of seed sold in Volume of the seed Sold in project project locations per crop in locations per crop in 2017/18 season (MT) 2016/17 season (MT) 140.48 195.10

60.1 51.2 14.00 21.30 17.50 9.14 16.75 23.5 30.8 9.8

Maize Soja P pea Grounut Seasem Other Crop

Figure 33: 2017 & 2018 Comparative Review of Seed Sales

Sales volumes of pigeon pea seed declined during this reporting period mainly attributed to the uncertainty related to the India market for the crop which resulted in near market collapse during the previous season34. Fertilizer Distribution The main companies that are supplying fertilizers on the market are Yara, Africa Fertilizers, Mozambique Fertilizers and Bayer. These companies have commenced distributing their fertilizer products through the same distribution systems (agro dealers) that the seed companies are using and are also using demonstration plots established by the seed companies to disseminate extension messages related to fertilizer use to drum up demand.

Retailers sold 112.7 metric tonnes of fertilizers in the project locations during the current agricultural season representing an increase of 150% compared to the previous season, when only 45 metric tonnes were sold. This growth in sales is mainly attributed to (a) the growing demand for fertilizers in the project locations due to intensifying demand activation activities and (b) improved distribution which has enhanced smallholder farmers access to the product.

34 The number of smallholder farmers growing pigeon peas in the project locations declined during the reporting period. The average area under pigeon pea cultivation per farmer also declined to 1,61 ha from last season 1.82 ha.

Fertilizer sales value in project locations in 2016/17 and 2017/18 season (Mts)

Volume of the fertelizer sold 4,846,100.00 in project locations in 2016/17 and 2017/18 season (MT) 112.7

2,250,000.00

2016/17 2017/18 2016/17 2017/18

Figure 34: Volume and Value of Fertiliser Sales in project locations

Text Box 4: Price of Fertilizers on the Market

The price of fertilizers declined during the reporting period from 50.00 MZN per kg (last season) to 43.00 MZN/kg during the current season, a reduction of 16%. Market actors attribute the price reduction to the appreciation of the local currency – metical against the main trading currencies, namely: USD and ZAR. Despite the price reduction, the increase in sales volumes enabled the revenues to spike to nearly 5,000.000 meticais.

The InovAgro facilitation team visited the Mozambique Fertilizer Company in Beira with a view to strengthen relationships and collaboration. The project team anticipates that collaboration with other companies, particularly Yara and BAYER, will continue to enhance product demand activation and strengthen distribution and retail channels in the project locations.

Distribution of Crop Protection Chemicals InovAgro acknowledges that crop productivity per hectare during the previous season(s) was impacted by frequent pest and disease attacks which the smallholder farmers were often not able to control due to lack of crop protection products. In this respect, InovAgro has been stepping up its engagement with crop protection companies and distributors (Curechem, Casa do Agricultor and Bayer) to ensure that required products are available in the project locations.

Figure 35: InovAgro Team Leader Visit to CureChem in Chimoio

Crop protection companies such as CureChem have also started using the same retail distribution network that was previously established for seed companies to distribute their chemical products. During the reporting period, a total of 5,122 Liters of assorted crop protection products were sold in the project locations to facilitate crop pest and disease management particularly for maize, sesame and groundnuts. Most smallholder farmers increasingly appreciate how crop pests and diseases can impact on their yields. For instance, during the previous season, the Fall Army Worm caused a significant reduction in farm productivity particularly in Erati, Malema and Ribaue. This experience has compelled the smallholder farmers to take pest and diseases preventive and treatment measures very seriously using the available crop protection products available on the market and hence the increase in sales of various crop protection products.

VOLUME OF CROP PROTECTION PRODUCTS SOLD IN THE PROJECT LOCATIONS DURING REPORTING PERIOD

Last Season

Current Season

0 1000 2000 3000 4000 5000 6000 Volume - Liters

Figure 36: Volume of crop protection products sold in 2018

InovAgro is cautious of the need to protect the environment and human safety through appropriate product handling, use and disposal. Alongside the demand activation activities, which are mainly being conducted through the seed demonstration plots, the extension agents also provide guidance on the safe usage and handling of the diverse products sold by their companies. AgriCon in Gurue and Molumbo, an agrodealer shop significantly supported the smallholder farmers to access appropriate insecticides required to mitigate the impact of the Fall Armyworm which had ravaged maize crops Figure 37: Agrodealer shop in Molombo selling various crop protection products during the previous season.

Employment Creation The commercial activities of the input companies (seed, fertiliser and chamicals) contribute immensely towards employment creation. Various categories of full time employees are required by the sector ranging from shop assistants, private seed inspectors, administrative personnel, field extension technicians and security guards. Other part time employeess are required particularly for the loading/ offloading of the cargo and related merchandise during transportation and distribution. In this respect, the sector provides employment and income opportunities particularly for the young graduates who otherwise would be unemployed. Table 9 below provides data on the numbers of people who were employed by the InovAgro supported input companies during the reporting period.

Table 9: Employment generation in inputs sector in the project locations

Pantner Full time Part time Total Pannar 5 - 5 Klein Karoo 5 10 15 Phoenix seed 4 - 4 Mutiana 2 - 2

Ikuru 3 28 31 Seed Co 3 - 3

Market Access 5 40 45 Agro delears (19) 40 6 46 CureChem 3 0 3 TECAP 2 0 2 72 84 156

Lessons Learnt and Conclusion 1. InovAgro’s work with agricultural input companies continues to fly as the flagship of the project’s interventions. The project’s work particularly with seed companies has positioned InovAgro as a respected stakeholder on the agribusiness market. The project needs to protect this positive reputation and acceptance which currently dominates its work on the market through continued strengthening of its relationships with the input companies management, and provision of technical backstopping to the companies commercial strategies formulation and implementation. 2. The growing recognition of InovAgro as a credible facilitator on for Ag. input companies has created opportunities for deal formation with large corporates such as SEED Co and CORTEVA – actors that are usually well resourced and are often less receptive about working in partnerships. 3. The growing sales for seed, fertiliser and related crop protection chemicals in the project locations dispels any concerns that could have been there that the project promoted technologies are beyond the financial capacity of smallholder farmers in the project locations given their economic standing in society. Although the sales should continue to grow to ensure that the company activities are commercially sustainable – the upward trend in sales should be applauded as encouraging. 4. The opening of 8 new shops for sale of assorted agricultural inputs (and with an eye towards purchasing the outputs) within one season – is affirmation of the market opportunities that the private sector continues to see in the project locations. It will be important to monitor the performance of the established shops in the next months to ensure quality control and satisfactory service delivery to smallholder farmers. 5. Input companies require support to develop and operationalise sustainable systems for credit management in their commercial transactions with Agro dealers and related actors. InovAgro continues to note that debt collection from agrodealers remains a high transaction exercise. Models that would allow for a reduction in the cost of debt collection would go a long way in promoting sustainable relationships between the companies and their Distributors / Agro dealers.

DRAFT WORK PLAN 2018 – 2019

2018 2019 Component Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Input Demand Engage input companies to develop plans for the establishment of Creation and demonstration plots in the project locations Extension Facilitate partnerships between seed companies, fertilizer companies and crop protection companies to promote coordinated product(s) marketing Monitor the establishment of demonstration plots by partner companies in the project locations Support input companies in the realization of field days Establish deals with input companies to develop and operationalize other demand activation interventions through media, social networking platforms, road shows and music events in the project locations Provide technical backstopping to Market Access to conduct 11 commercial seed fairs in the project locations Facilitate realization of a ToT training on GAPs for public and private sector extension agents in the project locations Input Distribution Support the launch of TERRAGRO Distribution hub in Nampula and Retail Support the launch of CORTEVA in Mozambique by PANNAR Support Input companies to identify and establish partnerships with appropriate Distributors and Agrodealers Establish (& implement) partnership deals for the expansion of Ag. Input retail shops in the project locations. Support input companies to train identified input distributors, agro dealers and lead farmers Support input companies to establish and implement appropriate service feedback mechanisms to track customer satisfaction (to encourage repeat transactions) Partnership Conduct quarterly partnership review meetings and adapt Management and interventions / deals to align with market trends Knowledge Conduct a review of the management & profitability of established Management shops and disseminate results Conduct partner satisfaction surveys to identify how InovAgro facilitation support can be improved.

Section 4: Enabling Environment The development of the seed sector requires a conducive enabling environment that allows for effective sector dialogue, regulation, quality control and a supportive policy environment. In this respect, InovAgro continued to work with two lead partners, the National Seed Authority (NSA) and the Association for the Promotion of the Seed Sector (APROSE), to deepen interventions related to seed sector dialogue, information sharing, and product quality control and certification. Details related to these two partnerships and the implementation progress achieved during the reporting period are discussed below.

1. Partnership with the National Seed Authority InovAgro partnership with the National Seed Authority focused on: A. Finalization of the National Seed Authority Website B. Operationalization of the Database within NSA C. Operationalization of Private Sector Seed Inspectors

1. A. Finalization of the website The development of the website has been completed. The website is now available on: www.ds.co.mz

The website provides information on the services provided by the National Seed Authority, legal instruments that guide work in the seed sector, access to templates for requesting seed certification services, data of seed inspections, laboratory analysis and seed certificates, statistics on seed production, processing, imports and marketing, sector reports and notices as well as information on projects that are working in the seed sector.

The website was officially launched to sector stakeholders by the Director of the National Seed Services on the 24th of May 2018 at the Provincial Offices for the Ministry of Agriculture and Silviculture in Manica, Chimoio.

Figure 38: National Seed Authority Staff with Stakeholders in Chimoio

InovAgro has been engaging with the National Seed Authority to encourage the organization to put in place a viable sustainability plan for the management of the website to ensure that appropriate personnel are assigned to manage the website to allow for regular updating of information and uploading of documents that are relevant for dissemination to the sector. More technical backstopping is required in this respect.

1. B. Operationalization of the Database The National Seed Authority conducted a training for all its technicians on how to use the system for internal data capture, storage and analysis to promote increased evidence based planning within NSA and the sector. The meeting was conducted over a two-day period from the 24 – 26th of April 2018 and was facilitated by InCentia – the company that developed the system.

Figure 39: Training of National Seed Authority Staff in Maputo

The training enabled the technicians within the NSA to familiarize themselves with the functions that can be performed by the database software and to debate how these functions could be incorporated in their fairly work to enhance service delivery effectiveness to the sector. InovAgro has now officially handed over this tool to the National Seed Authority. Effort by the PFU will now be focused on monitoring the use of the database in the day to day operations of the National Seed Authority, ensuring that it is being used (and if not to identify why not), and tracking the impact of the investment on the seed sector.

1. C. Operationalization of Private Sector Seed Inspectors In 2016, InovAgro supported the National Seed Authority and some private sector representatives to travel to Kenya and Zambia to learn how these two countries have operationalised private sector seed inspectors as a mechanism for seed quality control. Based on the lessons from these learning visits – a model for Mozambique was designed by the National Seed Authority and subsequently a Ministrial Diploma approving the licencing of private sector seed inspectors was passed in 2017. Under the current legal provisions, private seed inspectors are in principle licensed to inspect seed production fields for their own companies. The National Seed Authority will monitor the quality of the licensed Inspectors work and verify compliance to the defined legal regulatory statutes.

Twenty candidates submitted applications for licencing as Private Sector Seed Inspectors. The candidate evaluation committee that was established by the National Seed Authority rejected seven applications for various technical reasons in line with the evaluation criteria that had been establisihed. Three candidates failed to submit their application fees within the stipulated period and therefore only 10 candidates progressed to the training and final evulation process in Chimoio.

Table 10 below provides full list of the candidates that progressed to the training conducted at Phoenix Farm in Chimoio:

Table 10: Candidates who participated in training in Chimoio

No. Participant Name Company Company Base 1 Adelson Isac Phoenix Seeds Manica 2 Arcilho Raquias Phoenix Seeds Manica 3 Thaimo Domingos Companhia do Zembe Manica 4 António Gabriel Companhia do Zembe Manica 5 Armindo Calave Companhia do Zembe Manica 6 João de Araújo Companhia do Zembe Manica 7 Rosa Biningu Sementes Nzara Yapera Lda Manica 8 Rungano Waziweyi Sementes Nzara Yapera Lda Manica 9 Paulo Mkoka Agroserv Manica 10 António Armazém ACOF (Olinda Fondo) Zambézia

The training was facilitated by 5 technicians from the National Seed Authority as indicated in Table 11 below: Table 11: Facilitators for Inspectors Training ion Chimoio N.O. Trainer Position with the National Seed Authority

1 Elsa Timana Director – National Seed Authority 2 Maria Estrela Technician

3 Leocádio Gonçalves Head of Seed Inspection and Seed Quality Control

4 Milton Pinho Head of Registration and Release of Seed Varieties

5 Manuel Bassicolo Head of the Regional Laboratory in Chimoio

The training included both a theory and practical component at the Phoenix Farm.

Figure 40: Field work during Inspectors Training in Chimoio

At the end of the training – the National Seed Authority approved six candidates as fit to receive licenses to practice as Private Inspectors providing a service to their companies35. The six candidates who were approved are indicated in table 12 below:

Table 12: Approved (licensed) candidates to operate as Inspectors

No. Participant Name Company Company Base

1 Adelson Isac Phoenix Seeds Manica

2 Thaimo Domingos Companhia do Zembe Manica

3 António Gabriel Companhia do Zembe Manica

4 João de Araújo Companhia do Zembe Manica

5 Rosa Biningu Sementes Nzara Yapera Lda Manica

6 Rungano Waziweyi Sementes Nzara Yapera Lda Manica

The official handover of the licenses was conducted on the 22nd of August 2018 in Maputo and was facilitated by the National Director of Agriculture.

35 The candidates who failed to meet the set requirements are not limited from participating in the training again and being reevaluated in the future.

Figure 41: Licensed Inspectors showing their licences

InovAgro takes note that the work ahead lies on working closely with the National Seed Authority to ensure technical backstopping of the Inspectors and compliance audits particularly during the upcoming production season starting in October 2018. Some sector stakeholders (IKURU, Klein Karoo, Seed Co) who could not make it for the first training (for various reasons) have requested for a follow up training to facilitate accreditation of more inspectors. These actions will need to be prioritized by the National Seed Authority in the next months.

Figure 42: Director for IIAM congratulates one of the licenced inspectors

2. Partnership with the APROSE The partnership with APROSE has progressed well during the reporting period mainly focusing on strengthening the Association’s strategic planning, governance and service delivery to the membership. The scope of support provided by InovAgro during the reporting period is indicated in Table 13 below:

Table 13: Scope of InovAgro support for APROSE in 2018

Activity Amount US$

Operationalization of APROSE Office in Maputo (6 months office rental and 8,100 maintenance)

Development of APROSE Strategic Plan 2018 – 2020 (STTA Fees, 2 stakeholder 12,200 consultative workshops)

Operationalization of the Secretariat (6 months’ salary for Executive Director, 23,700 costs for quarterly management committee meetings, Annual General Assembly in November and other communication events)

Sector Studies, Dissemination and Policy Lobbying 6,000

TOTAL 50,000

Below are some of the key milestones achieved by APROSE during the reporting period.

2. A. APROSE Strategic Plan APROSE is currently in the process of re-defining its strategy for the next five years after the expiration of the previous strategy in 2017. To facilitate the depth of reflections required in the crafting of the new strategy, the APROSE Management Committee has engaged WinResources Consulting Company to undertake this work. The process will involve stakeholder consultations of the effectiveness of the previous strategy, determination of lessons learnt and the prioritization of key interventions that APROSE should be focusing on in the next five years. The strategy will also have a strong component on resource mobilization to ensure adequate depth in the analysis and planning of how the Association activities will be resourced moving into the future. The strategy will also revise APROSE management and governance structures, as well as its communication and visibility approaches. The Draft Strategy is expected to be ready by end of October / November 2018 and will be validated and approved at the Annual General Meeting to be conducted before the end of the year.

2. B. Governance of APROSE APROSE has undergone some significant management changes during the reporting period. Ismenio Chitata – who was the President of APROSE on behalf of PANNAR Seeds had to resign from the role after he left PANNAR Seeds in June 2018. The APROSE Management Committee engaged with PANNAR Seeds to nominate a replacement. Mr. Celso Ruface signed a contract with PANNAR Seeds to represent the company on all APROSE related issues. In this respect, Mr. Celso Ruface was appointed as the President of APROSE with effect from July 2018. Mr. Ruface had been involved in the formulation of APROSE, since he was formerly the Seed Sector specialist under InovAgro II, and has a deep understanding of the stakeholders, objectives and challenges facing the organization.

Maria Estrella who had also worked with APROSE as the Secretariat for the past 3 years has been replaced by Ms. Joana Matienga with effect from July 2018. Joana is currently serving her probation period and awaits confirmation into the role in September 2018.

To enhance the operational efficiency of the organization, APROSE has now identified office space in Maputo which will function as the Head Office of the association. The office is XXX

2. C. Service Delivery to Members APROSE has been focused on two key aspects during the reporting period in the provision of service to its members as indicated below:

A. Dissemination of seed legislation and harmonization standards to sector stakeholders

This work has been conducted in partnership with the USAID funded Regional Seed Trade project and involves regional meetings throughout the country to promote sharing of information and debate on the national and SADC seed protocols and exploring how greater harmonization can be secured with the SADC region to improve trade conditions and service delivery to the agriculture sector in the region.

B. Review of Seed Legislation in Mozambique Recently, APROSE has also commenced work in partnership with the Seed Trade project and other actors to review the adequacy of the current seed legislation instruments for the development of the seed industry. There are various school of thought with regards to this work. Some stakeholders in the sector are convinced that the legal instruments available in the country are adequate and that the interventions required should focus on promotion of the various regulatory provisions contained in national legislation framework. Other stakeholders are also of the opinion that a much clearer seed law is required in the country like the legal documents that are contained in other regional countries.

APROSE will need to play a key role in promoting this debate and ensuring that the appropriate actions are taken and implemented working with the various stakeholders in the sector.

Resource Mobilization The APROSE management team continued to implement resource mobilization initiatives to ensure adequate financing of planned current and future work. The table below provides an overview of the main funding support that has been secured and in the pipeline.

Table 14: Financial Mobilisation by APROSE during reporting period

Partner Funding Level Purpose Status of Partnership US$ Deal

SEED 149,000 Dissemination of SADC protocols to seed sector Approved and Signed TRADE stakeholders

AGRA 50,000 Communication and Marketing of APROSE services In negotiation.

FAO 83,000 Staff Costs for the Secretariat In Negotiation

TOTAL 282,000

Main Lessons Learnt and Conclusions Website and Data Base Management • The NSA needs to operationalize a sustainability plan for the effective management of the website and database. The use of these tools will need to be embedded in the organization’s culture. The new National Director of Agriculture needs to be engaged to ensure that he understands the need to use these tools as central instruments of the work within the NSA. This is important to ensure that the impact of both the website and the database corresponds with the investment that has been made.

Private Sector Seed Inspectors

• The private sector seed inspector model is still not yet fully understood by the various stakeholders in the sector. Some of the questions that were asked by participants during the license handover ceremony reflected the need to conduct more awareness building sessions to enhance knowledge and acceptance of the model by all stakeholders. InovAgro acknowledges that we are at the initial stage of developing the private sector seed inspectors model. It will be necessary for the National Seed Authority (and APROSE) to monitor and asses how the model will be implemented in the coming season, to identify eventual constraints and to improve the model. • There is need for InovAgro to provide technical backstopping to the NSA to facilitate the development and operationalization of a monitoring plan for continuous on the job training of the inspectors through carefully structured compliance audits. These compliance audits should not (particularly in the first year) be conducted in the spirit of exercising punitive measures but rather building the capacity of the accredited inspectors to dominate and be empowered to conduct the role. • There is need for the National Seed Authority to conduct refresher training sessions during the next year to ensure that the contact and technical backstopping of the accredited inspectors remains strong. This is particularly important to promote the entrenchment of trust between the parties and to foster more collaborative networking. The refresher training sessions should also be designed to capture learning emerging from the Inspectors activities to facilitate continuous improvement and adaptation of the model. • There is need to organize a follow up training and accreditation process for new inspectors to respond to demand emerging from companies such as Klein Karoo, SEED Co and IKURU. This training needs to be done quickly to ensure that the accredited inspectors can support the seed production efforts by their companies in the upcoming season.

APROSE

• The new management team at APROSE will require some technical backstopping in the next months to ensure that they deliver on planned work. Celso Ruface has a good understanding of the mandate of APROSE. Joana will require more support to settle in her role as the Director for the Secretariat. • InovAgro will continue providing technical backstopping towards the development of the strategy for 2018 – 2022 to ensure that the right level of depth is achieved in reviewing lessons learnt from the previous strategy and that they are adequately incorporated in the new strategy. This technical backstopping must be provided carefully without diluting the ownership of the process from APROSE management team.

• InovAgro will also have to continue providing technical backstopping to APROSE on governance (operational administrative and financial management) to promote entrenchment of strong transparency and accountability systems. This is particularly vital to ensure that APROSE retains the trust and confidence who are willing to provide support for the delivery of its work.

Draft Work Plan 2018 - 2019

2018 2019 Component Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Partnership with the Provide technical backstopping for population of website and National Seed operationalization of the intervention sustainability plan Authority Review use of the database within the NSA and determine impact on NSA operations and sector performance Support the NSA to develop and operationalize plan for technical backstopping of the licensed inspectors and compliance monitoring. Support NSA to conduct refresher training for licensed inspectors to enhance their skills Support NSA to recruit and conduct training for new inspectors Support the NSA to handover licenses on the accredited inspectors Partnership with Provide technical backstopping to APROSE for the development, APROSE dissemination and operationalization of the new strategy 2018 - 2022 Provide technical backstopping to APROSE for planning and realization of Annual General Meeting Support APROSE to conduct a study on a relevant sector theme, disseminate findings and lobby for an enabling policy environment Provide technical backstopping to APROSE secretariat to strengthen its resource mobilization initiatives for financial sustainability Provide technical backstopping for strengthening APROSE operational governance systems to ensure increased transparency and accountability Partnership and Conduct quarterly partnership review meetings and adapt Knowledge interventions as may be required Management Develop a paper on Operationalization of Private Seed Inspectors in Mozambique Develop video documentary on the work of a Private Seed Inspectors to generate more sector awareness on their role and potential contribution to the seed sector

Section 5: Output Marketing Smallholder farmers’ access to inclusive output markets is central to Inovagro’s goal of increasing household incomes. The project has piloted several models of linking smallholder farmers to output markets particularly contract farming schemes (during programme Phase 1) and supply contracts (during programme Phase II). These models have had mixed success as well as constraints, but have presented an array of learning which has been used to continuously upgrade Inovagro’s market engagement strategies.

For Phase III the project is seeking to consolidate the operationalization of an efficient output marketing system which connects smallholder farmers to large output markets (ETG, Olam etc.) through strengthening the role of the Commodity Aggregator Traders (CATs) whom the programme has already been working with during InovAgro II. The CATs play an increasingly important role of connecting smallholder farmers to markets through commercial aggregation of smallholder farmers produce and delivery to identified markets and larger traders.

During the reporting period, the InovAgro PFU focused on deepening the sustainability of the output marketing system through a range of activities designed to strengthen the transactional relationships between (a) the smallholder farmers and the CATs as one market system and (b) between the CATs and the large output buying companies (ETG, Olam, Royal Group etc.) as the other market system. In addition, the project also focused on enhancing the effectiveness of the business regulatory environment by supporting the Ministry of Industry and Commerce to disseminate and to implement new instruments designed to provide regulatory guidance on commercial output marketing activities in the project locations. InovAgro also had interventions to connect the CATs to support services (particularly financial institutions) as well as strengthening the governance of the CATs through targeted technical backstopping on business management. These activities will be discussed in detail below.

Partnerships during the Reporting Period During the reporting period, InovAgro established partnerships with 22 market actors (CATs) and 3 sector stakeholders (Ministry of Industry and Commerce and 2 research institutions). The main activities that were implemented under these partnerships are briefly detailed below:

Increasing number of buying posts:

Table 15: Buying posts in project locations

Indicator Description Baseline 2017 Milestone Target for Actual 2018 achievement No of accessible commodity trader buying posts 266 316 351 established in the projects locations (cumulative)

Expansion of the number of output buying points under Phase III is intended to enhance service delivery outreach of the CATs in the project locations. By increasing the number of output buying points the project anticipates that this will subsequently result in reduction of distances that the smallholder farmers have either walk or seek transport for ferrying their produce to the nearest output buying point, thus reducing their transactional costs and increasing profitability and service satisfaction. The Partnerships that were established with the 22 CATs were linked to this objective.

Enhancing the business capacity of the CATs Most of the CATs are structured as family owned businesses and are confronted by several business governance challenges which could limit their full growth and effectiveness. To provide long term sustainable capacity in the CATs, beyond project support, it is crucial to develop supporting systems that can provide capacity building support to the CATs for business strategy planning, management of their finances and personnel. In this respect, InovAgro established a partnership with the Business Polytechnic University in Nampula to develop suitable commercial technical training products for mentorship and regular technical backstopping of the CATs (and other value chain actors) on various themes central to output marketing business governance and execution. This will include financial management, crop handling and warehousing, effective management of produce buying posts as well as customer management and brand protection. The intention is that the University develops tailored training courses for the benefit of the CATs entrepreneurs and their related company employees.

Introduction of transaction enhancing technologies at the buying posts: Some of the factors which create tensions in the relationship between the CATs and smallholder farmers relate to disagreements around the weight of delivered crop produce, moisture content and commodity pricing. In this respect, InovAgro III seeks to reinforce the work that was started under Phase II to facilitate the increased use of transaction enhancing technologies at the buying centers such as digital produce weighing scales, price dissemination boards and moisture meters to increase transparency during the output buying processes. The effective use of moisture meters for instance during the produce buying processes also reduces losses related to procurement of produce above set moisture levels.

Business Environment and Regulation InovAgro established a partnership with the Ministry of Industry and Commerce to facilitate dissemination of regulatory instruments that define how commercial actors should conduct output marketing interventions in the project locations. The partnership with the International Growth Centre was also intended to provide data and intelligence on the pigeon pea sector to ensure that policy formulation and company business strategies are adapted to respond to developments in India which limited crop uptake.

Table 16. Summary of partnership agreements between InovAgro and output marketing actors in 2018.

Table 16: Project partnerships with Output Marketing Actors in Nampula Province

Financial Contributions (USD) Location Partner Partner InovAgro Primary Focus of the Deal All IGC36 19,500.00 12,000.00 - Realization of three workshops in Nampula, Mocuba and Maputo to provide regulatory and business advisory Locations service on how the sector could respond to Pigeon Pea sector constraints related to reduction in produce volumes purchased by India and price collapse.

Ministry 0.00 11,675.49 - Dissemination of output marketing regulatory policy instruments to provincial sector stakeholders Industry & Commerce IKURU - Market review to determine feasibility of company to supply groundnuts to South Africa. 273,435.00 9,015.00 - Increase number of output buying posts from current 22 to 26 in line with company growth strategy. - Purchase minimum of 520 tons of assorted produce (crops supported by the project) Chipangue e 8,674.58 4,941.67 - Increase number of buying posts from 8 to 17 in the Ribaue district in line with company growth strategy. Nampula Filhos - Review company business model and effectiveness of management systems - Purchase at least 580 tons of assorted output produce (crops supported by the project) Indústria 7,308.47 4,816.67 - Increase number of buying posts from 5 to 8 in the Ribaue district in line with company growth strategy. Moageira - Introduction of digital scales and related technologies at new buying posts. Fátima - Review company business model and effectiveness of management systems - Purchase at least 402 tons of assorted output produce (crops supported by the project) Ferragem 7,320.34 4,383.33 - Increase number of buying post from 8 to 14 in the Malema district in line with company growth strategy. Maleiro - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 370 tons of assorted output produce (crops supported by the project) Anita Catija 14,491.53 3,413.79 - Increase number of buying posts from 6 to 8 in the Erati district in line with company growth strategy. Sumail - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 575 tons of output produce (crops supported by the project). Constantino 20,958.33 4,266.67 - Increase number of buying posts from 31 to 40 in Erati district in line with company growth strategy Calisto - Introduction of digital scales and related technologies at new buying posts. - Review company business model and effectiveness of management systems - Purchase at least 710 tons of output produce (crops supported by the project). NAMPULA PROVINCE TOTAL 351,688.25 54,512.62

36 International Growth Centre

Cabo Delgado Province

Table 17: Project partnerships with output marketing actors in Cabo Delgado

Financial Contributions (USD) Location Partner Partner InovAgro Primary Focus of the Deal Delta 28,416.67 3,633.33 - Increase number of buying posts from 25 to 33 in Chiure district in line with company growth strategy. Commercial - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 327 tons of assorted output produce of crops supported by the project. Quedas do 11,533.33 3,333.33 - Increase number of buying posts from 10 to 14 in Chiure district in line with company growth strategy. Rio Lurio - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 271 tons of assorted output produce of crops supported by the project. Lancone 12,550.00 3,166.67 - Increase number of buying posts from 10 to 15 in Chiure district in line with company growth strategy. Cabo Commercial - Introduction of digital scales and related technologies at new buying posts. Delgado - Purchase at least 340 tons of assorted output produce of crops supported by the project. Carlos Afonso 12,550.00 3,833.33 - Increase number of buying posts from 10 to 17 in Namuno district in line with company growth strategy. Corneta - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 405 tons of output produce of crops supported by the project. Pensão 12 de 10,700.00 3,266.67 - Increase number of buying posts from 8 to 12 in Namuno district in line with company growth strategy. Junho - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 115 tons of output produce of crops supported by the project. CABO DELGADO PROVINCE 75,750.00 17,233.33 TOTAL

Zambezia Province Table 18: Project partnerships with output marketing actors in Zambezia

Location Partner Partner InovAgro Primary Focus of the Deal Min of Industry & 0.00 11,675.49 - Dissemination of output marketing regulatory policy instruments to provincial sector stakeholders Commerce WINNUA 47,774.00 9,656.15 - Increase number of buying posts from 6 to 9 in Gurué, Mocuba e Namarroi districts. - Introduction of digital scales and related technologies at new buying posts. Zambézia - Review company business model and effectiveness of management systems - Explore feasibility of HACCP certification to open new markets - Purchase at least 1,720 tons of maize. Agro Trading 16,500.00 4,966.67 - Increase number of buying posts from 9 to 17 in Gurué, Ile Mocuba e Namarroi districts. - Introduction of digital scales and related technologies at new buying posts. - Review company business model and effectiveness of management systems - Purchase of 1,720 tons of maize. Lucas Jaime 8,625.00 2,916.67 - Increase number of buying posts from 9 to 11 in Alto Molocué district in line with company business plan Selemane - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 60 tons of output produce of crops supported by the project from smallholder farmers Macua Comercial 22,400.00 3,850.00 - Increase number of buying posts from 8 to 10 in Alto Molocué district. - Introduction of digital scales and related technologies at new buying posts. - Purchase 1,000 tons of output produce of crops supported by the project from smallholder farmers Complexo 100% 7,803.33 2,650.00 - Increase number of buying posts from 8 to 10 in Namarroi district. Mussela - Introduction of digital scales and related technologies at new buying posts. - Purchase 60 tons of output produce of crops supported by the project from smallholder farmers Fonseca Jaime 11,333.33 3,241.67 - Increased number of buying post from 12 to 17 in Gurué and Malema districts. - Introduction of digital scales and related technologies at new buying posts. - Purchase of at least 255 tons of output produce from smallholder farmers. Silvério Comercial 11,218.33 3,250.00 - Increase number of buying posts from 10 to 14 in Gurué and Malema districts. - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 446 tons of assorted output produce from smallholder farmers Francisco Jaime 13,633.33 5,033.33 - Increase number of buying post from 25 to 30 in Gurué, Malema and Ile districts. Nharrugue - Introduction of digital scales and related technologies at new buying posts. - Purchase at least 2,095 tons of output produce from smallholder farmers. Gervázio Arnaldo 12,925.00 3,833.33 - Increased number of buying post from 13 to 16 in Gurué, Malema and Ile districts. Semblante - Introduction of digital scales and related technologies at new buying posts. - Purchase 295 tons of assorted output produce from smallholder farmers Total ZAMBEZIA 152,212.32 51,073.31

Results achieved during the reporting period The following are the results that were achieved by InovAgro during the reporting period in relation to the above-mentioned partnerships:

Output Procurement from smallholder farmers A total of 351 buying posts were operationalized by the CATs to facilitate purchase of maize, sesame, soya beans, groundnuts and pigeon peas of which 249 buying posts were old stations and 102 new buying points established this season. Cabo Delgado had the least number of buying posts with a total of 91 operational buying posts while Zambezia was at peak with a total of 147 operational buying posts during the reporting season. The lower investments in Cabo Delgado can in part be attributed to the security situation in the province which made it difficult to attract private investments.

Buying Posts in the Project Locations

Nampula Cabo Delgado Zambezia

160 140 120 100 80 60 40

# OF BUYING POSTS BUYING OF # 20 0 Old New Total Buying Posts in District

Figure 43: No. of Old and New buying posts in the project locations

VALUE FOR MONEY REVIEW

Under this component - InovAgro invested a total of US$ 99,354.48 unlocking a further investment from the partners totalling US$ 590,696.16. The total investment made by InovAgro and its partners equates to US$ 690,050.64.

The operationalization of the 351 buying posts in the project locations facilitated the procurement of a total of 11,158 Metric tons of assorted produce by the CATs from smallholder farmers in the three InovAgro project locations. This volume purchased by CATs represents approximately US$ 3,802,042.00 (Three million eight hundred and two thousand and forty-two United States Dollars). This amount will contribute towards the improvement of smallholder farmers household incomes in the project locations.

Table 19: Volume and Value of Output Purchased in Project Locations in 2018 Location Partner Buying Volume Crops purchase (MT) posts purchased Old New (ton) groundnuts maize pigeon pea sesame soybean Nampula IKURU, SA 22 4 520 100 320 0 100 0 Chipangue e Filhos 8 9 580 70 420 42 48 0 Industria Moageira 5 3 402 0 402 0 0 0 Fatima Ferragem Maleiro 8 6 305 5 95 120 50 35 Anita Catija Sumail 6 2 575 220 15 250 90 0 Constantino Calisto 31 9 710 310 30 270 100 0 NAMPULA TOTAL 80 33 3,092 705 1,282 682 388 35 Cabo Delta Comercial 25 8 327 30 90 57 150 0 Delgado Quedas do Rio Lurio 10 4 271 90 120 21 40 0 Loncone Comercial 10 5 340 160 150 10 20 0 Carlos Afonso Corneta 10 7 405 60 90 0 255 0 Pensao 12 de Junho 8 4 115 50 35 10 20 0 CABO DELGADO TOTAL 63 28 1,458 390 485 98 485 0 Zambezia WINUA 6 3 1,720 0 1,720 0 0 0 Agro Trading 9 8 642 30 550 0 0 62 Lucas Jaime Selemane 9 2 75 0 60 15 0 0 Macua Comercial 14 8 900 0 650 100 150 0 Complexo 100% Mussela 8 3 180 0 180 0 0 0 Silverio Comercial 10 4 446 0 210 160 0 76 Fonseca Jaime 12 5 255 0 175 50 0 30 Francisco Jaime 25 5 2,095 0 410 440 0 1,245 Nharrugue Gervázio Arnaldo 13 3 295 0 130 140 25 0 Semblante TOTAL Zambezia 106 41 6,608 30 4,085 905 175 1,413 Overall Total 249 102 11,158 1,125 5,852 1,685 1,048 1,448 Overall Value (Mts) 228,122,500.00 47,812,500.00 58,520,000.00 16,850,000.00 75,980,000.00 28,960,000.00

Maize accounted for the largest volume of produce that was purchased by the CATs with a total of 5,852 metric tonnes having been purchased from smallholder farmers in the project locations. The higher volumes of maize purchased in the project locations are attributed to growing demand linked to the commercial activities of Cerveja de Mozambique to produce Impala beer, a product which is gaining increasing market acceptance.

Volumes of output produce purchased in the project locations (Metric Tonnes) 7000

6000 Maize, 5852 5000

4000

3000 VOLUME 2000

1000 Pigeon Peas, 1685 Soya beans, 1448 Groundnuts, 1125 Sesame, 1048 0 Maize Soya beans Groundnuts Pigeon Peas Sesame

Figure 44: Volume of output produce purchased per crop

Pigeon pea volumes are expected to increase significantly in the coming months as the buying season had just commenced at the time of writing this report. Although only a total of 1,048 metric tonnes of sesame were purchased during the reporting period, the current market price of 65 - 75 meticais per kilogram enabled it to generate the most revenue of all the 5 crops supported by the project.

Capacity Building of CATs on Business During the reporting period – InovAgro partnered with the Polytechnic University in Nampula (Business School) to develop various training products customized for the CATs and related output marketing value chain actors. The university has been able to conduct field visits in Erati, Mocuba and Ribaue to conduct a skills audit of the CATs in the governance of their business activities to identify skills gaps where the University will need to focus their training products.

To ensure that the skills audit process is beneficial to the participating CATs, the audited companies were supported to review their business models and governance systems for effectiveness and repositioning in line with the growth plans of the companies. Simplified Business Plans for five companies are being finalized by September 201837. The beneficiary companies will also be supported to develop quarterly action plans to facilitate implementation of key actions contained in the Simplified Business Plans. InovAgro is now in discussions with the Polytechnic University in Nampula to determine which training products they will prioritise for rolling out by January 2019.

37 The supported companies are: Agro Trading, Mutiana, Chipangue e Filhos, Industria Moageira, Winnua and Constantino Calisto.

Promotion of an Enabling Business Environment for Output Marketing InovAgro worked closely with the Ministry of Industry and Commerce (MIC) and the International Growth Centre (IGC) to deliver interventions which contribute towards a conducive business environment for the output marketing sector.

Strengthening Ministry of Industry and Commerce capacity as a sector regulator One of the key obstacles that has been faced by the MIC is its limited ability to capture correct data of output produce traded in various locations. In this respect, a decision was undertaken by the Government of Mozambique in the 38th parliamentary session that the MIC must introduce functioning systems which enable the regulatory authority to track all output marketing data and the activities of output buyers in the various districts. InovAgro supported initiatives by the MIC to conduct stakeholder consultative meetings on the systems that are required to facilitate correct sharing of output marketing data particularly by the CATs in the project locations. Three consultative meetings were conducted in August 2018 in three districts Milange, Molumbo and Gurue with 150 attendees.

Figure 45: Dissemination of output marketing books in Molumbo and Gurue

The findings from these meetings have provided the Ministry of Industry and Commerce with the framework upon which they will be rolling out their awareness campaigns in the various districts on how the public and private actors should work together particularly in the capturing of output marketing data during the season. InovAgro however acknowledges that most CATs have little or no interest in providing business information to public institutions for several reasons but mainly to avoid payment of income taxes. It is also time consuming to collect and provide the required data. It is therefore important to analyze how the Ministry of Industry and Commerce can provide tangible incentives to motivate the CATs to adhere to this initiative and to stimulate their participation. Debate on the future of the Pigeon Pea sector in Mozambique: InovAgro partnered with the International Growth Centre to organize two workshops in Mocuba and Nampula which brought together all actors in the pigeon pea sector to reflect on the market performance of the crop and the implications of the value chain actors. Ninety people (representatives from commodity buying companies, smallholder farmers associations, research institutions, government agencies etc) participated in Mocuba while 104 pigeon pea value chain actors attended the Nampula event which was co-chaired by the Ministry of Industry and Commerce and the Ministry of Agriculture.

Figure 46: Pigeon Pea Workshops in Nampula and Mocuba

A key result from these meetings was the push by stakeholders for increased transparency by the government in the allocation of quotas to companies for export of the Pigeon Peas to India. Most companies lamented that the criteria for the allocation of quotas by the government for export was unclear with allegations of corrupt activities.

Conclusion 1. InovAgro’s partnership and coordination with the Ministry of Industry and Commerce is gaining significant traction. For the first two phases – InovAgro’s relationships with the Government of Mozambique had been primarily through the Ministry of Agriculture and Silviculture. The increasing collaboration between the project with the MIC presents another window for the project to strengthen its position in the sector and to contribute towards the government’s development agenda for the country particularly in the dissemination of policy and regulatory instruments to sector stakeholders. InovAgro will also in the next season explore possibilities for partnerships with the Mozambique Cereals Institute and the Bolsa de Mercadorias (Commodities Exchange) 2. The entry of the Royal Group Limited company as a key output buyer of pigeon peas on the market directly for export has resulted in the weakening of the monopoly that had long been enjoyed by the Export Trading Group (ETG). This is expected to result in improved market competition which is likely to result in improved prices for smallholder farmers in the project locations. 3. Increased demand for maize by the Cerveja de Mozambique has created an immense opportunity for smallholder farmers who in previous seasons had struggled to secure a strong market for their maize. This increased demand has resulted in improved market prices for maize this reporting season and as such improving the crop profitability. The entry of Cerveja de Mozambique as a key buyer of maize is filling in the gap that had been created by the exit of CARGILL from the market in 2016. 4. The partnership with the International Growth Centre has positioned InovAgro to work with an international partner who has credible scientific research experience capable of generating data on various value chain constraints and opportunities. This will position the project to have more access to evidence which can be used to lobby for a more enabling environment for the agribusiness sector in Mozambique. 5. Inovagro’s partnership with UniLurio represents an opportunity for the operationalization of commercial training products to improve the governance of output marketing companies. UniLurio has the right level of WILL to implement this initiative but they will require some technical backstopping to enhance their SKILLS to ensure that the training products design and marketing strategies are viable and technically sound.

OVERVIEW OF WORK PLAN FOR 2018 - 2019 2018 2019 Component Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Establishment of Collect data related to output marketing transactions at output marketing established buying posts. retail network Conduct Partnership review meetings with CATs and related stakeholders Negotiate deals with new and old partners to facilitate crowding in and expansion of buying posts and services in project locations Conduct yield forecasts with a suitable market partner and disseminate market intelligence to CATs to guide commercial planning for 2019 season Capacity Support UniLurio to finalize development of training products on Strengthening of various themes related to output marketing Output Marketing Support UniLurio to develop viable marketing strategy for Stakeholders developed training products (includes commercial model) Support UniLurio to market training products to market actors Realization of trainings on various output marketing themes Partnership reviews and adaptation of model to align with any market changes / requirements Documentation of model and results for knowledge dissemination Promotion of an Support Ministry of Industry and Commerce to roll out regulatory enabling guidelines to all CATs and other value chain actors Environment Conduct a maize value chain study in partnership with the International Growth Centre Conduct workshops to disseminate findings from the maize value chain review to influence policy related to maize trading Produce paper on the effectiveness of Maize Output Marketing Strategies in Northern Mozambique with IGC Conduct Annual Output Marketing Stakeholder Engagement Conference with MIC

Section 6: Access to Finance The PFU continued with its dual approach towards improving smallholder farmers access to finance:

A. Establishing Linkages with Formal Financial Institutions B. Promotion of financial savings at community level through VSLAs for purchase of agricultural inputs.

The progress in relation to the above strategies is discussed below:

Linkages with Formal Financial Institutions Since Phase I of the project – InovAgro has been working with Opportunity Bank of Mozambique to facilitate the provision of formal financial services to smallholder farmers in the project locations.

During the reporting period – the PFU significantly stepped up efforts to widen the number of financial institutions working with the project to promote increased financial inclusion of smallholder farmers. Three financial organizations were engaged for partnership negotiations as indicated below:

Table 20: Financial Institutions engaged by InovAgro in 2018

Target Partner Status of Deal Negotiations GAPI Disengaged. No consensus secured Letshego38 Agreed. Progressing to implementation BancABC39 Agreed. Progressing to implementation

Deal Negotiations with GAPI The focus of the proposed deal with GAPI was to operationalize a credit product for working capital for smallholder farmers and SME companies particularly the CATs, Input Distributors and Agro dealers. GAPI preferred that InovAgro should provide the seed money to initiate the credit facility to these value chain actors. InovAgro does not have capacity to provide requested seed money, so discussions were ended. The PFU also concluded the WILL of the bank to offer this service was minimal as the bank seemed reluctant to provide its own financial resources as contribution towards cost and risk share in the proposed work.

38 Letshego Financial Services Mozambique (Letshego Mozambique) commenced business on 11th February 2011. It is a subsidiary of Letshego Holdings Limited (LHL), a pan-African financial services group that is headquartered in Gaborone, Botswana. The company was incorporated in 1998 and has been listed on Botswana Stock Exchange since 2002. Today, the company has a market capitalization of approximately MZN17 billion or just over US$500 million. It is a licensed micro bank, and has launched current, savings and fixed deposit services since 2014. . 39 BancABC Mozambique is a wholly owned subsidiary of ABC Holdings Limited (ABCH). ABC Mozambique was incorporated in 1999 as BNP Nedbank (Moçambique), a joint venture between BNP Paribas and Nedbank of South Africa. In 2001 ABCH acquired 100% of shares in the bank, changing its name to African Banking Corporation (Moçambique) and eventually to BancABC Mozambique. The original product offering included Treasury Services, Investment Banking, Corporate Banking and Structured Trade Finance. This has recently been complemented by a fully-fledged Retail banking offering to individuals and small businesses.

Deal Negotiations with Letshego Letshego has a running partnership with a DAI sister project – FSDMOZ, a DfID initiative which promotes market initiatives for promotion of financial inclusion of the bottom of the pyramid. Letshego has been piloting agency banking particularly in the southern region and at present seeks to expand the initiative to other locations to facilitate provision of financial services particularly to the urban poor and rural communities.

Based on a recommendation from the FSDMoz PFU team – InovAgro has been in discussions with Letshego to facilitate the expansion of the Agent Banking model in the project locations with a specific model which involves engagement of Agrodealers and CATs to deliver the financial services as agents in their shops. This will enable smallholder farmers to secure an integrated package of services from the established input shops. The business proposition for the Agrodealers and CATs is revenue generated from facilitating the transactions, increased foot print in the shops due to an added service, and improved branding support provided by the bank. This model has been agreed and is in line with Letshego business strategies.

InovAgro will not be making any financial contribution under this deal as costs are already covered under the deal with FSDMoz. InovAgro will essentially support linkages of the bank to Input Distributors, Agrodealers and the CATs to facilitate contract negotiations and operationalization of agency banking in the project locations.

The deal signing is expected to be completed by the 25th of September as field work is scheduled for the 1st of October 2018. Deal Negotiations with BancABC BancABC conducted an exploratory assessment of the financial needs of smallholder farmers in some InovAgro project locations (Gurue, Malema, Erati, Ribaue and Nampula). Following this study, BancABC has agreed to partner with InovAgro on three fronts:

Establishment of Agency Banking with a Supervision Centre in Erati: The bank has selected Erati as the most ideal district for expansion of their financial services as it is strategically positioned to increase the bank’s presence between Nampula and Cabo Delgado. The Bank targets to identify at most two Agrodealers in Erati that can be positioned as Agents in the district. Supervision of this work will be conducted from the Nampula main branch and the bank is exploring possibilities for the establishment of a supervision mobile center in the district if the number of Agents increases.

Promotion of Agency Banking and Demand Activation: BancABC will be participating in the Input Fairs that are being coordinated by Market Access and will use these platforms to create awareness of Agency banking and demand activation. BancABC has already paid participation fees for the upcoming Gurue Input Fair.

Design, Testing and Operationalization of NANO Loans: BancABC recognizes that it remains difficult for the rural and urban poor to access formal credit through the banks. The bank has designed a 30-day NANO loan facility which allows for maximum credit amount of US$100 to be provided through MPESA cash wallet on a Vodacom line. The credit application, assessment, approval and loan disbursement is conducted through the mobile phone. Although this product is not an agriculture tailored credit facility, project beneficiaries would benefit from these NANO loans to cover household and production emergencies in their farms and smooth cash flow needs.

The bank is currently testing the software to be used using a sample of 2,000 randomly selected potential clients. To ensure that the final product addresses the requirements and abilities of the project beneficiaries, 5% of the sample has been drawn from InovAgro beneficiaries. Participation in the product testing is voluntary and at the discretion of each person included in the sample database.

The product is expected to be rolled out in the project locations after testing in the next three months. Demand activation will be conducted through the network of agents to be established through the input fairs and input field days.

Collaboration with Opportunity Bank Inovagro’s collaboration with Opportunity Bank continued during the reporting period mainly focusing on provision of financial literacy education to smallholder farmers on various financial themes particularly the importance of savings and information related to the financial services that are provided by the bank suitable for smallholder clients.

Figure 47: Opportunity bank engaging with SHF at a field day in Gurue

886 SHFs attended seven meetings conducted in Gurue facilitated by the Opportunity Bank representatives as part of the financial literacy outreach. Results A total of 54 smallholder farmers secured loans from Opportunity Bank during the reporting period to finance their agricultural production activities.

Table 21: Smallholder Farmers receiving loans from formal financial institutions

Log-frame Indicator Baseline Log-frame Target 2018 Actual Achievement 2018 No. of smallholder farmers receiving 893 1,000 947 loans from formal financial institutions (cumulative)

Operationalization of the Fundo Agricola InovAgro continued to promote the operationalization of the Fundo Agricola in project locations as a strategy to empower smallholder farmers to save own resources to finance purchase of agricultural inputs at the start of the Agricultural season.

Table 22: Smallholder farmers participation in savings groups

Indicator Baseline Log frame Milestone Achievement Target 2018 2018 No. of smallholder farmers participating in 4,721 5,000 12,050 Savings Groups to establish an Agricultural Fund in project locations

InovAgro adopted a three-pronged strategy during the reporting period in relation to the operationalization of the Fundo Agricola in the project locations: EXPANSION, DEEPENING and emphasis on enhancing the SUSTAINABILITY40 of the intervention.

Figure 48: Pillars of the Fundo Agricola

Expansion of the Fundo Agricola In 2017 – 4,721 smallholder farmers participated in the Fundo Agricola initiative. The intervention was concentrated in three districts (Ribaué, Malema and Mocuba). InovAgro at the time was working through two co-facilitating organizations, NANA and Ophavela.

40 InovAgro considers three aspects to be extremely important for the sustainability of the Fundo Agricola initiative (a) Effective Technical Facilitation (b) Viable linkages with Input Companies and (c) Effective Group Governance. Discussion of the sustainability component of this initiative will be captured in an upcoming paper due to be ready for dissemination in March 2019.

Given the success and momentum that the project acquired during Phase II in the implementation of the Fundo Agricola initiative – the PFU took a strategic decision to promote the expansion of this initiative to benefit as many smallholder farmers as possible in the various project locations. In this respect, the PFU established partnerships with seven Co-Facilitators as indicated in Table 23 below.

The seven co-facilitators enabled the expansion of the Fundo Agricola initiative to eight districts out of the 11 districts where the project is operational. InovAgro provided an average investment of US$8.51 per farmer to cover the facilitation costs of the seven co-facilitators.

Table 23: Fundo Agricola Co-Facilitators in 2018 Partner Location Planned Target InovAgro Outreach Investment (USD) Mocuba 3000 26,650 NANA Ile 1000 8,883 Alto Molocue 1000 8,883 Terra Amiga Namarroi 1800 24,111 Association of Animators of Savings groups of Malema 1350 5,609 Malema Association of Animators of Savings groups of Ribaue 1400 5,594 Ribaue UATAF-AFC Erati 1500 16,667 UDACC Chiúre 1000 6,515 Ophavela41 All - - Total 12,050 102,912

To be able to successfully expand the Fundo Agricola initiative the following attributes were considered critical by the project:

A. Operational Guide for the Implementation of the Fundo Agricola Initiative B. Capacity Strengthening of new co-facilitators in the project locations

Development and Dissemination of the Fundo Agricola Manual InovAgro engaged Ophavela to develop the Fundo Agricola operational guide, designed as a resource book for Co-Facilitators and Group Promoters on how the Fundo Agricola initiative should be implemented. Various topics are covered in this operational guide including:

- Objective of the Fundo Agricola - Savings Group Formation and Management - Management of the group funds - Establishing linkages with input service providers - Purchase of Seed / Negotiating Contracts with Input Service providers

The draft of this Manual has been completed by Ophavela and copies are expected to be printed this after the final validation by the PFU. All co-facilitators have been provided with the draft version for use as an interim resource.

41 Ophavela assumed a technical backstopping role for the other Co-Facilitators

Capacity Strengthening of the Co-Facilitators InovAgro employed two strategies for the capacity building of co-facilitators to enhance their capacity to deliver the Fundo Agricola, formal trainings of co-facilitators and exchange visits.

Formal Trainings of the Co -Facilitators Two trainings were conducted to enhance the capacity of co-facilitators to be able to implement the Fundo Agricola Table 24: Co-Facilitators Trainings

First Training Second Training Training Location Ribaue Mocuba Date(s) 15 – 17 August 2018 21 – 23 August 2018 Participating Co-Facilitator UDACC, UATAF, and 2 Associations NANA Organizations of Ribaue and Malema

Twelve staff members from the co-facilitator organizations participated in these trainings. Various topics were included for discussions particularly value proposition of the Fundo Agricola to smallholder farmers, savings group formation and management, establishing linkages with input service providers and mechanisms for tracking groups performance.

Co-Facilitators exchange visits for sharing of inter-district learning To strengthen sharing of learning between the co-facilitators on the implementation of Fundo Agricola three exchange visits were organized by the project, particularly to share learning between the old and new co-facilitating organizations. Table 25: Co-Facilitators Learning Exchange Visits

Date(s) Location Instructing Co-Facilitator Learning Co- Organization facilitator Organization(s) First Exchange Visit 21 May 2018 Namarroi NANA Terra Amiga Second Exchange Visit 23 May 2018 Erati Ribaue and Malema UATAF Savings Groups Associations Third Exchange Visit 24 May 2018 Chiure Ribaue and Malema UDACC Savings Groups Associations

These exchange visits included group discussions and exercises, visits to some savings groups to determine how the groups are working and troubleshooting on any challenges that they were facing and reinforcing understanding on the purpose of the Fundo Agricola and how it differed from the social and credit funds.

In each of the three exchange visits – the InovAgro Finance Intervention Manager participated in the meetings and complemented the discussions for quality control and technical backstopping as may have been required.

Deepening of the Fundo Agricola A Village Savings and Loan Association (VSLA) is a group of people who save together and take small loans from those savings. The activities of the group run in determined cycles of one year (or less), after which the accumulated savings and the loan profits are distributed back to members. The purpose of a VSLA is to provide simple savings and loan facilities in a community that does not have easy access to formal financial services. While the VSLAs normally engage in savings to cover the costs related to financing small income generation projects, education, health and emergencies such as funerals, InovAgro has supported the groups to develop a new product whereby they save own resources specifically to finance purchase of agricultural inputs and related investments required to strengthen their participation in contemporary value chains.

During the reporting period, the PFU focused attention on strengthening the quality of relationships between the savings groups members and input suppliers available in each community. It is the opinion of InovAgro that by strengthening contact between the groups and input suppliers the trust levels between the actors will be enhanced providing a greater incentive to save more to purchase assorted agricultural inputs, as information on various topics will be exchanged more frequently to facilitate entrenchment of confidence between the parties. By improving the quality of relationships between the groups and input suppliers – InovAgro anticipated that the intervention would be deepened to allow for growth and accumulation of benefits.

Engagement meetings between the savings groups and the input companies were conducted at district level and focused on dissemination of information on input(s) pricing, yield potential, purchase points within the community, appropriate handling of the inputs, storage and Good Agricultural Practices. The savings groups are scattered and are often in communities with very difficult access. If the private sector input companies were to target engagement with each savings group, the transaction costs related to this work would be extremely high and unsustainable. As such, to ease the communication, private sector companies disseminated information to the Savings Group Promoters who in turn transmitted the secured knowledge / learning.

Figure 49: Input companies’ engagement with VSLA promoters

The district meetings were complemented by extension visits by company agents in the locations as well as participation of the savings groups members in field days and input fairs that were rolled out by the private sector companies in all the 8 districts.

While InovAgro had mainly promoted Fundo Agricola as a resource that smallholder farmers could use to purchase certified seed, the project has been encouraging assorted private sector partners to widen the basket of agricultural inputs that they introduce to the savings groups members. As such companies such as Agro Trading have exposed the farmers to seed, agro chemicals, fertilizers, and related implements. By widening the range of products, InovAgro hopes this will deepen the quality of relationships that are built between these value chain actors.

The Co-Facilitators in the various locations have also requested for a meeting to review the effectiveness of the mechanisms that were employed in the previous season to facilitate purchase of seed in Malema, Ribaue and Mocuba. This meeting which has been scheduled for the last week of September 2018 is intended to examine mechanisms that can be put in place to strengthen the procurement process of required inputs to ensure that they are delivered on time42.

RESULTS The number of smallholder farmers participating in Fundo Agricola has increased significantly during this reporting period compared to the 2017 levels. A total of 12,097 smallholder farmers participated in Fundo Agricola during this season. The 12,097 smallholder farmers were organized in 440 groups of which 266 groups were new while 174 groups are old groups inherited from the project Phase II.

District Men Women Total Mocuba 1,485 951 2,436 Ile 729 381 1,110 Alto 447 724 1,171 Molocue Namarroi 665 584 1,249 Malema 1,300 575 1,875 Ribaue 304 1,029 1,333 Erati 715 1,208 1,923 Chiúre 344 656 1,000 Total 5,989 6,108 12,097 Figure 50: Smallholder farmers participation in Fundo Agricola

Mocuba had the highest number of participants followed by Erati and Malema.

42 For this season – the target is to have the inputs delivered 1st week of November 2018 just before the rains start. Rains are expected from the December 2018.

No. of smallholder farmers participationg in Fundo Agricola per District

Chiure Erati Ribaue Malema Namarroi Location Location Alto Molocue Ile Mocuba

0 500 1000 1500 2000 2500 3000 No. of smallholder farmers

Figure 51: Smallholder farmers participation in FA per district

In the current season, male and female participation in the groups was almost even. 49% of the group members were male while 51% were female. In 2017, women dominated the groups with 62% of the group members having been female. This indicates that the Fundo Agricola is increasingly gaining popularity amongst male members of the community. The dynamics related to adding the Fundo Agricola to the regular VSLA group is changing male perceptions of the groups as they now increasingly realize that this is a sustainable mechanism that can enable them to acquire the production inputs required for their agri- enterprises in their communities. A total of 3,386 new male members joined the groups a little under the 3,874 new female members recorded during the current season. InovAgro will have to monitor this trend very closely and ensure that the increased male interest to participate in the VSLAs with the Fundo Agricola component does not compromise the social fabric, trust and sustainability which characterized the previously female dominated groups.

Gender Composition of the Savings Groups

70 60 50 40 30

Percentage 20 10 0 2017 2018 Year

Male Female

Figure 52: Gender composition of the savings groups

The savings cycle is scheduled to end on the 31st of October 2018. Table 26 below provides an overview of the total savings as at 31st August 2018. The projected total savings when the savings cycle closes on the 31st October 2018 is also provided.

The VSLAs saved total of % proportion of savings as at 31st August 19,906,469 Meticais 2018 equivalent to US$337,398 as at 31st August 2018. Of this amount, the Fundo Agricola accounted for 5 22 4,433,207 Meticais (equivalent to $75,13943), while the normal revolving loan fund totaled 73 US$245,059 and the social fund accounted for the final US$17,200 As such, 22% of Social Revolving Loan Fund Agricultural Fund the saved funds are allocated under the Fundo Figure 53: % proportions of accumulated savings Agricola initiative.

Previously, the InovAgro PFU had placed primary emphasis on tracking the performance of the groups solely on the Fundo Agricola initiative. This approach has been adjusted as the project noted that the co- facilitators placed emphasis on all the three types of funds (social, revolving loan and the agricultural fund) in the delivery of their technical support especially as the project expands this intervention to new districts such as Ile and Nammarroi which involves forming of new groups. Moreover, InovAgro is now increasingly embracing the concept that the social fund (which is used to support community emergencies) and the revolving credit fund (which mainly funds assorted livelihood initiatives) are both complementary initiatives which can be embraced as work the project is supporting towards enhancing community resilience to shocks. SDC has in the previous years encouraged the project to expand its interventions to cover resilience initiatives.

As can be seen Table 26 below – the performance of the groups in Namarroi was way below expectation. The groups in Namarroi were supported by Terra Amiga and this work was largely driven by Lucas Andre, the Director. Unfortunately, during the first weeks when the groups were being formed and the savings concept was being introduced – Mr. Lucas Andre became severely sick and eventually passed away just when the work was taking off. The management at Terra Amiga has struggled to identify a new person who could carry on the work that Mr. Lucas had started. The InovAgro PFU took a management decision in consultation with the SDAE to re-assess the capacity of Terra Amiga to continue with the works. InovAgro however has maintained continued contact with the established groups through their Promoters and the SDAE while arrangements for provision of facilitation support either through Terra Amiga or a new Facilitator are finalized.

43 Exchange Rate is 1 US$ = 59 Meticais

Table 26: Accumulated Savings as at 31 August 2018

Location No. of Savings Groups Actual Savings as at 31st August 2018 Projected Savings at close of savings cycle Members 31 October 2018 Social Fund Loan Fund Agricultural Social Fund Loan Fund Agricultural Fund Fund Mocuba 2436 74,556 1,757,728 2,029,830 96,698 2,043,472 2,247,395 Chiure 1000 49,365 339,923 736,650 104,712 459,376 1,282,249 Erati 1923 458,320 3,850,544 425,340 759,813 5,247,983 876,453 Namarroi 1249 10,990 126,440 25,995 27,804 174,216 55,783 Ile 1110 22,799 177,330 437,712 59,716 362,168 1,525,323 Alto Molocue 1171 9,115 133,910 264,080 18,179 304,677 1,218,596 Malema 1875 307,920 6,770,405 411,060 431,010 7,330,340 511,515 Ribaue 1333 81,717 1,302,200 102,540 110,041 1,780,924 222,161 TOTAL 12,097 1,014,782 14,458,480 4,433,207 1,607,973 17,703,156 7,939,475

The savings cycle is scheduled to end on the 31st of October 2018. At this point, a total of nearly 8,000,000 meticais is expected to have been saved by the groups under Fundo Agricola. This equates to approximately US$135,000 at the current exchange rate.

Table 27 below provides an appreciation of the volume of seed that the smallholder farmers will be able to purchase using the saved financial resources. The savings will allow them to purchase at least 50 metric tonnes of seed, which could help plant between 1,103 and 17,643 hectares with certified seed, depending on the type of seed purchased:

Table 27: Projection of Seed Volumes to be purchased using Fundo Agricola

Current Projected Funds Volume of seed Volume of Seed Total Land Area Estimate available @ end of that can be required per hectare that can be Price Per cycle purchased (kgs) planted (Ha) Kilo Maize 125 7,939,475 63,512 25 2,541 Pigeon Peas 120 7,939,475 66,162 10 6,616 Sesame 150 7,939,475 52,930 3 17,643 Soya Beans 120 7,939,475 66,162 60 1,103 Groundnuts 120 7,939,475 66,162 50 1,323

The process of placing orders for the required agricultural inputs will be conducted in October and deliveries are expected from the start of November 2018. The VSLAs in all the districts have elected representatives who now constitute the Negotiation Committees that have been tasked to represent the VSLA members in deal negotiations with target input suppliers. To ensure the smooth and timely delivery of inputs to the smallholder farmers the following timed milestones have been agreed as binding in all locations: Table 28: Road Map towards purchase of required inputs

Agreed Action Who Does? Date Share actual information on all input All input companies 26 September 2018 prices and available stocks Build Data Base of Inputs Required in Each District Negotiation Committees 26 – 13th October 2018 District + Co Facilitators Send Database of Required inputs with District Negotiation Committees 14th October 2018 service providers for review and + Co Facilitators quotations Conduct Deal Negotiation Meetings with Input Companies, District 18 October 2018 Various Service Providers to select Negotiation Committees, Co preferred supplier(s) Facilitators and InovAgro PFU District Negotiation Committee(s) report VSLA groups + District 19 – 23 October 2018 back to members and select preferred Negotiation Committees + Co supplier Facilitators District Negotiation Committees Sign Input Companies 25 October 2018 Contract with selected supplier(s) District Negotiation Committees Inputs delivered to the groups and Input Companies 1 – 15 November 2018 payments effected in line with agreed District Negotiation Committees contract provisions

Main Lessons Learnt and Conclusions The following are some of the main lessons learnt during the reporting period related to this intervention:

Work with Formal Financial Institutions

1. The Agent Banking Model is gaining traction in Mozambique as an alternative channel to promote inclusion of rural populations in formal financial services. Letshego, BancABC and Opportunity Bank are the leading actors on the market showing strong interest for the operationalization of the model. These banks are learning from the model and are constantly adapting to improve commercial viability and enhance quality of services provided by the Agents. These banks recognize the fact that Agrodealers and the CATS constitute a potentially viable network of Agents that could work with the bank. This represents an opportunity for InovAgro to facilitate these linkages. InovAgro will need to continue working closely with its sister project, FSDMoz to ensure that the quality of technical support and proposed deals are financially feasible and sustainable. This coordination is also crucial to avoid double dipping and duplication of efforts particularly with FSDMoz. 2. Formal financial institutions are increasingly interested in the activities of savings groups in rural communities. The increasing efforts by BancABC for instance to develop an information management system that will enable them to track the performance of each group is evidence of this growing interest by the banks to target this rural market. This represents another opportunity for InovAgro. The project will however remain cautious to ensure that the technologies that are introduced by other market actors do not compromise the social fabric of the groups particularly the trust between the members.

3. Formal financial institutions are increasingly recognizing the importance of mobile platforms in the provision of financial solutions to the market. The partnership between BancABC and VODACOM for instance is evidence of the growing collaboration between the mobile and financial sectors. Most smallholder farmers in the project locations however use MOVITEL as their preferred service provider and InovAgro will need to continue encouraging financial institutions to strengthen their partnerships with MOVITEL to have wider reach of the rural populations in the project locations.

Work with Savings Groups

1. The size of financial resources that are being saved by the VSLAs in the project locations are steadily growing. The continued use of the box for storage of the money presents a risk to the group members tasked to look after the saved money. Although it is acknowledged that the money is frequently loaned to group members to attract interest – there are times when the amounts that remain in the box are significantly high. InovAgro needs to engage with FSDMoz and related financial partners to explore how this risk may be reduced for the safety and comfort of the group members.

2. Dissemination of the Fundo Agricola methodology to new Co-Facilitators has been relatively easy particularly through the provision of the draft operational manual and the realization of the exchange visits. The partnership with Ophavela to facilitate training of new Co-Facilitators has worked well and should be the main strategy for expansion of the intervention to other locations (even beyond the three provinces in the North where InovAgro is operational44)

44 There are reports from SEED Co that the concept of the Fundo Agricola has been adopted by savings groups in Manica. InovAgro PFU has dispatched a mission to engage with the groups in Manica to explore how they are

3. Inovagro’s Knowledge Management component should facilitate the production of video content that can be used as a complementary resource to the Narrative Operational Manual for the expansion of the Fundo Agricola model to new locations. The content should provide clear visuals related to the various steps that must be followed to operationalize the Fundo Agricola and to ensure that the initiative remains sustainable in the beneficiary locations.

4. Capacity strengthening of the established District Management Committees remains a critical component of the required interventions to ensure the sustainability of the Fundo Agricola. It is possible that the capacity strengthening of the District Management Committees can be bundled as part of the training work that Ophavela will continue to deliver in the future.

5. Although Inovagro’s work with the VSLAs has been rooted on the promotion of community savings for purchase of inputs, the importance of the Social Fund and the Credit Fund should not be underestimated particularly in terms of strengthening community livelihoods, resilience and capacity to respond to shocks. InovAgro increasingly recognizes the fact that these funds are complementary in their functions and importance to the beneficiaries, especially as the revolving credit fund can also be used to supplement the FA.

6. InovAgro will review the performance of the Fundo Agricola model at the end of the cycle and the input purchase. Prior to the start of the new cycle next year, a workshop will be conducted to assess performance during the reporting period and to refine the Fundo Agricola model ahead of the new savings cycle in 2019. This workshop will be attended by co-facilitators and some group members / promoters to ensure an inclusive process in the adaptation of the model.

operating including any adaptations that they may have made on the model. It will be critical moving forward to create exchange visits between the groups in the North and other regions to facilitate sharing of experiences and learning.

Draft Work Plan 2018 - 2019

2018 2019 Objective Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Financial Inclusion Operationalize Agency Banking Model through Letshego and of smallholder BancABC in the project locations farmers through Review the results from the NANO pilots and support demand formal financial activation in the project locations institutions Collaborate with Opportunity Bank on financial literacy education and widening of their services through mobile banking Financial Inclusion Carry out deeper analysis of current results and review options of smallholder for increased efficiency farmers through Support Ophavela to finalize the Operational Manual for Fundo formal financial Agricola institutions Support Ophavela to conduct ToT for Co-Facilitators for expansion of Fundo Agricola to new locations Support Ophavela (or NANA) to roll out training programme for capacity strengthening of District Management Committees and Development of District Action Plans for Fundo Agricola Sign partnerships with co-facilitators to facilitate implementation of Fundo Agricola in the project locations Support exchange visits between co-facilitators, District Management Committees and Promoters to encourage sharing of learning / Knowledge related to the implementation of the Fundo Agricola initiative Facilitate linkages between input companies and the savings groups for product demand activation and deal negotiations for partnerships Partnership Conduct quarterly performance reviews of the intervention Management partnerships to ensure performance and adaptation as may be required. Work with the KM team to produce video on Fundo Agricola to act as a complementary resource for the Narrative Operational Manual on Fundo Agricola Produce a paper on the Effectiveness of Fundo Agricola in linking smallholder farmers to input markets

Section 7: Land Tenure Security This section provides details regarding the implementation progress related to the Land Tenure Security Interventions executed by the PFU in the project locations. InovAgro partnered with Terra Amiga, a community based organization which focusses on promoting sustainable environmental and land management based in Quelimane.

The project interventions during the reporting period were concentrated in Namarroi – a location where the risk to smallholder farmers land tenure security is ranked high primarily due to the commercial activities of Portucel – a forestry company whose commercial operations require huge tracts of land for expansion of company forestry plantations.

The main interventions that were implemented by the project during the reporting period focused on facilitating the individual land titling for the smallholder farmers in Mutaliua and Mussano. The launch of the individual land titling initiative took place in a ceremony held on the 28th March 2018 during the SDC Monitoring Mission to Namarroi. More than 300 people attended the ceremony (around 40% were women). During this event, the two communities of Mussano and Mutaliua received their delimitation certificates, the result of work that had been initiated under Phase II of the project.

Figure 54: Ceremony for award of delimitation certificates.

The District Permanent Secretary who led the ceremony expressed satisfaction at the launch of the individual land titling initiative and InovAgro efforts to intensify provision of interconnected agribusiness services to enhance the profitable use of the land by the beneficiary communities.

The individual land titling process involves two separate steps:

A. A social preparation process which involves community sensitization and awareness campaigns on the land law and consultations regarding boundaries and training on effective management of land conflict. This process also involves the capacity strengthening of community structures mandated to coordinate the sustainable management of community land and related environmental resources. B. Land registration process which involves the verification and entry of legal data (national identity numbers and geo-referencing of the plots) of the intended beneficiaries.

Both steps require strong outreach campaigns to ensure inclusiveness of all community members. The model that InovAgro is promoting, which is inspired on an CTV initiative, has two specific attributes in relation to systemic change:

1. It empowers established community land management structures (paralegal officers, land management committees) to take some responsibilities for elements of work which previously were conducted by the Government technicians particularly the determination and marking of land boundaries of intended community members. The role of the SPGC technical officers is therefore reduced to verification of the correctness of the boundaries in line with the law. This reduced the cost of processing the individual DUAT per hectare from the current US$50 to approximately US$10. 2. The InovAgro model seeks to empower communities to save own resources through their Community Land Management Committees to finance processing of their land titles. This initiative is intended to reduce years of dependency on donor support for the financing of DUATs for community members – a scenario that InovAgro deems to be unsustainable for expansion of land tenure security initiatives in the project locations. This will be the main vehicle for expansion of land titling in other project locations.

Activities and Results The following are the main activities and results that were secured during the reporting period:

Community sensitization and capacity strengthening of structures Four community sensitization meetings have been conducted in the two communities. These meetings were aimed at sharing critical information about the land titling process and the value proposition to the community members.

Figure 55: Community sensitization meeting

A total of 237 people (135 were women) participated in the meetings. The community members who participated in these meetings will act as the intervention champions and will contribute towards the dissemination of the information in their communities as well as neighboring villages.

As part of the social preparation work prior to the titling of the individual plots - a district seminar was conducted on the 9th of May 2018. The workshop which was chaired by the District Administrator was designed to review main challenges arising from community consultations during land titling. A total of 67 women and 76 men who are directly involved in community land management participated in the workshop. This event provided platform for sharing of information among the participants particularly to harmonize understanding about the approved government procedures for community consultation. The roles and responsibilities of the various parties under the low-cost model that is being championed in

Namarroi were discussed and agreed thus paving the way for a smooth implementation of the titling process.

A critical component of the work that was conducted during this stage was the capacity strengthening of the two Land and Natural Resources Management Committees that were established during the delimitation process in 2017 in Mussano and Mutaliua. Two refresher trainings were conducted focusing on the roles and responsibilities of the established committees and ensuring that they are properly constituted. New committee members were elected in some cases to cover gaps in the leadership structure and induction sessions were conducted to ensure that the new elected members are integrated to assume their roles effectively.

Figure 56: Meetings of Land and Natural Resources Management Committees

Land registration The paralegal officers and the community land management committees have facilitated the registration of 1,890 household plots of land in the two communities in preparation of the verification of the land boundaries and issuance of the DUATs by the SPGCs.

Table 29: Distribution of household’s plots for titling

Community No. of No. People No of plots Households Men Women Total

Mutaliua 388 613 791 1.404 811 Mussano 597 874 1.119 1.993 1.079 Total … 985 1.487 1.910 3.397 1.890

The verification of the household land boundaries by the SPGC is expected to be commence in October 2018 and the DUATs for the beneficiary households are expected to be issued by the government by the 31st of December 2018.

Lessons Learned and Conclusions

1. The SPGC office (technicians) require more exposure to the InovAgro promoted model which involves the use of community established structures to perform some tasks related to the individual titling of land in communities. This model, which was developed and first operationalized by CTV, allows for the reduction of costs in the processing of individual land titles thus making the DUAT more accessible to rural poor communities. There is need to engage with CTV to facilitate stronger dissemination of the model to generate wider acceptance and understanding by the sector stakeholders. This will have to be done by InovAgro through the scheduled exchange visits to the delimitated communities. 2. There is a huge dependency syndrome that has been generated by developments projects that assume the responsibility for the payment of full costs for DUAT for smallholder farmers. As in the seed sector, there is need to operationalize campaigns which reinstall in the beneficiary communities that reality that payment of expenses related to the DUAT is the responsibility of the beneficiary title holder. In this respect, clear messages related to the DUAT value proposition need to be designed and disseminated in the project locations through multi-stakeholder platforms such as community radios and Farmer Associations amongst others. 3. InovAgro should consider the realization of exchange visits by sector stakeholder to the delimitated locations as a priority activity starting from October 2018. These exchange visits should be designed to facilitate the expansion of the land tenure security interventions to other locations by other stakeholders through their own resources and community savings. It will be critical for InovAgro to engage with Terra Amiga and Centro Terra Viva (CTV) to ensure that the model is properly documented in formats that enable dissemination / sharing with interested stakeholders. 4. The realization of promotional events to encourage increased investments by agribusiness stakeholders in the delimitated locations is a critical follow up action that InovAgro requires to promote from October 201845. The concentration of investments in the delimitated locations by agribusiness stakeholders will act as a strong incentive for neighboring districts to adopt land tenure security interventions. InovAgro will need to identify a suitable market partner who can work with the authorities in Namarroi and Mocuba to promote investments in the 4 communities.

45 The major risk of this initiative is to incentive wrong agribusiness partners, i.e., partners that do not have an inclusive win-win business approach, or to attract partners that do not know how to deal with local communities. To minimize this risk InovAgro will have to conduct rigorous due diligence of the potential agribusiness partners. The community land management committees will also require some legal assistance in the initial stages of the negotiations.

Draft Work Plan 2019

2018 2019 Component Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Finalization of the Geo- referencing of identified plots by the SPGC technicians Individual Titling of Processing of the DUATs for the beneficiary households by the household land in the SPGC office two communities Handover of the DUATs to beneficiary households Expansion of works Facilitate exchange visits to the two beneficiary communities by beyond the two sector stakeholders to disseminate and promote discussions on beneficiary communities the model Support efforts by the Community Land Management Committees to design and operationalize a funding mechanism to finance delimitation and individual titling of land in new beneficiary communities Engage CTV to develop an operational guide (for practitioners) to facilitate the delimitation and individual titling of land. Support Co-Facilitator to provide refresher trainings for Community Land Management Committees and the Paralegal Network Promoting the Support Co-Facilitator and established Community Land productive use of Management Committees to conduct promotional events to delimitated land in the attract agribusiness investors in the communities with land titles beneficiary communities

Section 8: Knowledge Management and Project Results Measurement InovAgro understands that the dissemination of knowledge emerging from its interventions should be a central part of the project work. The PFU has initiated the delivery of Knowledge Management interventions and the milestone achievements below were achieved during the reporting period:

Development of the knowledge management strategy A Knowledge Management Expert, Mr. Tim Vickery, was engaged by the PFU to lead the development of the KM strategy. This KM strategy should position the project to:

1. Look back to capture, distil and package the learning and knowledge generated in Phases I and II primarily to inform external stakeholders; 2. Build upon current KM&C practices and systems to apply a collaborative learning approach in Phase III that ensures the knowledge, information and data needed to adapt/respond to changing needs and priorities is captured and shared in a timely, efficient ways to maximize results. Integrating with the emerging MRM strategy and processes is a key part of that. 3. Focus on three priority themes where KM&C support is most needed to increase the likelihood that InovAgro will deliver on its targets for expansion of current interventions to new districts, crowd in new market actors, stimulate replication, mitigate constraints and prepare for exiting.

In this respect, the development of the Knowledge Management Strategy was structured to identify current and previous knowledge holders that must be engaged moving forward. In addition, the assessment has also included a review of the current state of play (how the project is currently capturing and disseminating knowledge) to identify gaps and opportunities that the project needs to harness. A phased approach has been adopted by the PFU to implement the KM interventions as follows:

• Build: June-December 2018 • Upscale: January 2018 – March 2020 • Sustain & Exit: April 2020 – December 2020

Following this phased approach, the project has actively been attempting to build the intervention portfolio for the past three months (since June 2018) and the PFU expects that a fully-fledged portfolio will be operationalized by December 2018 paving way for expansion at the start of 2019. A total of 4 partnerships are currently being operationalized by the PFU:

Table 30: Project Knowledge Management Partners

Partner Status of Deal Planned InovAgro Investment (US$) The University of Sao Tomas Agreed 15,000 Aguacheiro Multi Media Agreed 20,000 Erati Community Radio Agreed 5,000 Alto Molocue Community Radio Agreed 5,000 TOTAL 45,000

These deals are discussed in detail below:

Partnership with the University of Sao Tomas in Mozambique The partnership with the University of Sao Tomas has been designed to facilitate the implementation of an Annual Market Systems Development Conference each year in Maputo. This conference will provide platform for the discussion of emerging lessons from both public and private practitioners who are implementing assorted market based interventions in the agribusiness sector. The University will assume the role of peer reviewing papers that will be presented during the conference for quality control, assuming the administrative and logistical arrangements related to the event and fundraising from market actors to facilitate delivery of this initiative as an annual regular event.

The conference this year has been scheduled to be a 1 day event, soon after the Annual Planning Meeting on the 14th of November 2018.

Partnerships with Community Radios in Erati and Alto Molocue The InovAgro PFU received four proposals from community radios that are operating in the project locations to facilitate the production and broadcasting of radio programmes focusing on agribusiness development. The radio program is intended to give smallholder farmers and other value chain actors a platform for information exchange and debate on various agribusiness themes such as input supply, output market prices, women participation in agriculture etc.

In this first instance, the PFU has selected two proposals from community radios in Erati and Alto Molocue as the best fit in line with the project objectives and implementation approach. The PFU is now in discussions with these two community radios to agree on the partnership cost sharing arrangements, required technical backstopping support and work plan. The PFU expects that the broadcasting of the radio programmes will commence on the 1st of November 2018. The month of October will be dedicated towards research and product development. The PFU expects that the radio programmes will be sponsored through private sector advertisements and related sponsorship deals, strengthening the commercial sustainability of community radios to provide a viable platform for knowledge dissemination in the project locations.

Partnership with Aguacheiro Multi Media The PFU has renewed its partnership with Aguacheiro Multi Media – a media company that operates from Maputo. Under the partnership with this company – the InovAgro PFU has agreed that Aguacheiro will produce quarterly newsletter which has been branded GROWING MARKETS46 to facilitate sharing of information regarding InovAgro project activities and the commercial work of the project partners. Although this newsletter initiative is starting as a project initiative – the PFU hopes that Aguacheiro will transform the project newsletter (in the next 6 months of partnership) into an Agribusiness Newsletter for the wider sector whose publication and circulation will be supported through private sector advertisements and sponsorship deals.

Aguacheiro will also continue to work with InovAgro to produce media content on various themes to be disseminated through social platforms and related channels to disseminate messages / learning on various themes linked to the project interventions.

46 First edition of the newsletter is 90% ready and is expected to be disseminated early October 2018.

Monitoring and Results Measurement The Monitoring and Results Measurement Team at the PFU unit focused on four specific activities during the reporting period as detailed below:

Development of the MRM Strategy A draft MRM strategy has been developed to define how the project will collect data to monitor its performance and impact. The strategy has been developed to ensure that the project complies with all DCED standards for monitoring, evaluation and attribution of results. This strategy is expected to be finalized and disseminated to all PFU staff by the 30th of December 2018.

Development of Intervention Guides Five Intervention Guides were developed during the reporting period for Inputs, Extension, Output Marketing and Finance interventions. With the help of an STTA expert, the development of the Intervention Guides provided an opportunity for the PFU team to better understand the interventions under Phase III, particularly the logic, flow of results, measurement plan for results and the risk matrix related to each intervention. The Intervention Guides are a management tool that will help to improve the quality of intervention delivery by the PFU team.

Review of the Project Log frame An engagement session with SDC management team was conducted on the 3rd May 2018 to review the project log frame particularly the accuracy of defined milestone targets and alignment of the Log frame to the Project Document. A revised log frame, mainly with some minor revisions at output level, has been submitted to SDC on the 30th of June 2018 for approval.

Half Year and End of Season Survey The half year and End of Season surveys were conducted by the PFU team during the reporting period. These half surveys were intended to determine the current project performance (for each indicator) against milestone indicators defined in the Log frame. The results from these surveys have informed the production of this Annual Report.

Draft Work Plan for 2019 2018 2019 Component Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Knowledge Work with the University of Sao Thomas (USTM) to realize a Management national conference on MSD Finalize partnership discussions with community radios in Erati and Alto Molocue. Support the Community Radios in Erati and Alto Molocue to design and market radio programmes to project value chain actors. (Emphasis is on securing private sponsorship for the radio programmes) Broadcasting of the radio programmes in the project locations Dissemination of Quarterly Newsletter in Partnership with Aguacheiro Development of Video scripts and shooting strategies Video documentation of case studies in the project locations + Dissemination Produce papers for publications in international journals Monitoring and Review project intervention guides to determine and adapt Results theory of change as required Measurement Conduct Staff Refresher Training on MRM Regular Intervention Monitoring to track results Conduct Half Year Survey and Disseminate Results Conduct End of Season Survey and Disseminate Results

Section 9: Gender and Resilience The InovAgro project fully understands the importance of mainstreaming gender across all its interventions as well as strengthening community resilience to shocks particularly given the unpredictable weather patterns arising from the increasing effects of climate change. This section provides an overview of the work that has been done during the reporting period in relation to Gender and Resilience.

Gender Two specific activities were considered critical by the PFU during the reporting period under this component:

A. Developing a gender strategy for the project phase III to guide future interventions under this component. B. Training the PFU staff on gender issues to transform the team from being gender blind to gender aware.

Gender Assessment The PFU engaged an STTA to conduct a rapid gender assessment of its interventions in April 2018. The gender assessment was aimed to increase Inovagro’s understanding with respect to:

• the appropriateness, effectiveness and efficiency of the project gender interventions mainstreamed to facilitate inclusive agribusiness development in the project locations. • the complementarity and synergy of gender related actions supported by InovAgro in the framework of the Country’s Gender Strategy and towards actions of other stakeholders promoting inclusive economic market led agribusiness development; • the positive and negative impact of current agribusiness national policies, public and private stakeholder activities in relation to gender and market led agribusiness development in the project locations. • Ongoing / Planned stakeholder gender related activities which InovAgro could support to strengthen gender inclusion in agribusiness development in the project locations.

The field work was carried out in three districts (one district sampled in each province where InovAgro operates). The sampling criteria were designed to cover a range of agro-ecological farming, agricultural marketing and sociocultural systems.

A total of 140 project stakeholders were engaged during this rapid assessment through focus group discussions and three workshops that were conducted in each of the districts as indicated in Table 31 below:

Figure 57: Male Focus Group Discussion

Table 31: Research sample engaged during gender strategy consultations

No Focus Men Women Total Grou ps FOCUS GROUPS RIBAUE 3 11 17 31 GURUE 2 11 9 22 CHIURE 4 14 15 33

WORKSHOPS

RIBAUE 6 6 12

GURUE 8 8 16

CHIURE 9 2 11

NAMPULA DAY 1 8 7 15

NAMPULA DAY 2 4 5 9

TOTAL INFORMANTS 67 64 140

Some of the main findings and recommendations that emerged from the rapid gender assessment are discussed briefly below:

1. Village Savings and Loan Associations (VSLAs) VSLA is the InovAgro intervention that has the greatest potential to empower women and therefore should be placed as a priority intervention of the Gender strategy. VSLAs are a crucial intervention not only because InovAgro directly reaches most women through this intervention, but also because of the facilitation that is provided to the VSLA groups involves awareness raising amongst rural women and men about the importance of their participation in agribusiness activities. The training draws out the challenges the traditional gender roles in the communities, as both men and women are encouraged to engage in money management through VSLA.

2. Gender Sensitive Extension and Demand Activation Services Private sector companies that are conducting extension and demand activation services should be supported to incorporate gender mainstreaming in these activities. For instance, Farmers’ field days should be gender sensitized with support of guidelines that encompasses incentives to encourage male farmers to invite their spouses to field/farmers’ days; dissemination of messages regarding gender and good relationships in communities by local leaders; and conduct sensitization sessions to underline the advantages of working jointly as a farm family using male gender champions. The guidelines that the PFU should support partners to develop should include separate sessions for male and female farmers to encourage their active participation and debate. The field days should also promote labor savings techniques such as minimum tillage, labor saving post-harvest techniques and improved post-harvest storage. The agricultural input demand activation activities should also encourage specific women’s groups to be responsible for demonstration fields, to promote increased agricultural productivity amongst women farmers (in both male and female headed households). The demonstration fields managed by female groups will increase promoted visibility to female farmers along with female gender champions.

3. Promotion of Gender Champions Gender champions are important in challenging longstanding gender norms as ‘seeing is believing’ in rural communities. Gender champion women and men show their fellow community members that different gender roles are possible and as such can be considered ‘trendsetters’ in promoting changes in rural areas with respect to social and cultural gender norms. The gender champions could be female extension officers, female CATs and Lead Farmers with potential to demonstrate that women are capable to participate in agricultural change.

4. Business Mentoring of female entrepreneurs Tailored mentoring of female entrepreneurs should be reinforced as part of InovAgro’s facilitation support to entrepreneurs. There is need to strengthen platforms where experienced male and female traders who are InovAgro partners share their experiences with younger/newer colleagues. This intervention would entail the following: elaboration of a mentoring guide for both mentor and mentorees; realization of an initial workshop to introduce mentoring to both mentors and mentorees; annual meetings to exchange experience and monitor the intervention.

5. Promote an enabling environment through gender aware discourse and dialogue Various strategies should be adopted by InovAgro to promote Gender-aware discourse and dialogue with respect to microloans, understanding of gender, land tenure security and agricultural performance as well as knowledge of intersection of gender and seed promotion. For the later, it is possible that the PFU could support APROSE to carry out a gender analysis of seed promotion examining regional, gender and age differences with respect to seed use. This work would contribute to understanding of the relationship of seed promotion and Women Economic Empowerment (WEE).

Strategy Development and Dissemination The PFU embraced the findings and recommendations of the rapid gender assessment in the development of the project Phase III Gender Strategy. The strategy was completed in May 2018. The InovAgro PFU understands that the implementation of the gender strategy is dependent on the capacity of the project’s public and private implementing partners. Given the importance of securing the buy-in of these partners with regards to the proposed gender interventions, the PFU conducted trainings for the project partners to facilitate the validation and dissemination of the gender strategy proposed interventions.

The partners’ engagement workshops demonstrated their general understanding of how gender-relations impact the delivery of their commercial interventions. The partners also expressed interest in working for increased gender equity but they need support in transforming their proposals into practical action steps and how to monitor these actions. For example, the partners mentioned ‘jealousy’ as an obstacle for women’s increased participation in trade and demonstration fields and suggested that awareness raising amongst men was a feasible action. However, an activity such as ‘awareness raising’ is not very specific. Figure 58: Partner Engagement Workshops There is a need to support the partners in identification of realistic objectives and concrete activities.

The PFU therefore considers the implementation of additional partner training on gender resulting in “action plans”, as a crucial next step. The initial proposals for the Gender Action Plans developed during the partner engagement workshops do not require additional funds (or only limited additional funding) and can be integrated into existing partnership agreements.

Text Box 5: Gender Results Highlights during the Reporting period:

The following are considered by the PFU as the main milestone achievements secured during the reporting period in relation to gender:

✓ Development and Dissemination of Gender Strategy for Phase III to project stakeholders ✓ 6,108 women actively participating in the Fundo Agricola initiative enabling them to save own financial resources to enhance their inclusion in agribusiness opportunities promoted by the project in relation to access to varied input technologies. ✓ Three female Business Leaders / Entrepreneurs (Mutiana, WINNUA and Indústria Moageira Fátima) supported by the PFU to refine their business plans to enhance the potential for sustainability of their businesses. ✓ One female Private Sector Inspector licensed

Resilience InovAgro takes note that the smallholder farmers in the project locations have been affected by the irregular weather patterns which often result in shocks related to floods and droughts. These shocks weaken the project supported interventions which seek to strengthen household livelihoods, incomes and wellbeing through effective participation in agribusiness value chains.

The PFU is currently exploring an opportunity to work with Hollard Insurance in Mozambique to facilitate the operationalization of a commercial Index Insurance product for maize production. The main assumptions that Hollard makes in their commercial model are that drought tolerate maize varieties provided by seed companies provide crop protection during the flowering stage. The assumption is that if drought tolerant maize seed varieties are paired with index insurance (II) this would extend the protection of the crop during the rest of the growing season until harvest as the proposed II would provide crop protection during the crop establishment, vegetative and yield formation stages as indicated in Figure XX below.

Procurement of the insurance product would be bundled with seed purchase and the insurance would cover the value of the seed. A premium of 20% of the value of seed would be charged in addition to the cost of seed and the seed company would remit the collected premium to the insurance company at the end of the sales period. There are proposals that the insured seed would sold with a seal on the package that would enable the farmer to distinguish insured seed from uninsured seed.

Figure 59: Sample Insurance Seal

The indemnity payment would be effected when the index is triggered. In this case, the affected farmers would receive vouchers with which they would purchase replacement seed from the partner seed company which upon collection of all vouchers from the affected farmers and providing the required seed would submit the vouchers to the insurance company for reimbursement of the value of seed reimbursed.

Some pilots to test this model have been conducted by the University of California working in partnership with Phoenix Seeds and Klein Karoo. The pilots were conducted in Chimoio.

InovAgro, FSDMOZ and INOVA have expressed interest in understanding this product better and exploring potential to partner with Hollard Mozambique in the commercial operationalization of the product. Rather than engaging Hollard as individual projects, a decision has been made that in the event of a deal, all the three projects would have a single partnership agreement, but with each project supporting Figure 60: Maize growth stages covered by the index insurance a specific component of the work. InovAgro is leading the engagement and deal negotiation with Hollard. More information has been requested from Hollard to understand how weather data will be collected, the challenges that Hollard expects to encounter in rolling out this product and the proposed mitigation strategies.

In this deal – InovAgro potentially could support Hollard to implement interventions related to product demand activation and establishing linkages to seed companies.

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Partnership with the World Food Programme

InovAgro partnered with the World Food Programme during the reporting period to conduct a feasibility study for implementation of resilience interventions in Northern Mozambique. The results from this study are intended to inform how InovAgro III (and the follow on SDC programme in 2021) can incorporate more resilience interventions particularly to promote household asset creation, a common entry point used under the R4 methodology.

Figure 61: R4 Methodology

Text Box 6: R4 Comprehensive Risk Management Approach

R4 risk management strategies allow farmers to become resilient and break away from cycles of poverty and food insecurity by:

1. Reducing risks and improving productivity through household and community rehabilitation and creation of assets that improve the natural resource base of farmers and raise awareness about ways to deal with weather-related shocks. 2. Transferring risks that drive food insecurity through insurance which when triggered provides payment for losses caused by specific weather shocks. 3. Building risk reserves from savings that help buffer shocks and meet short term needs in a way that foster the ability to cope with idiosyncratic shocks. 4. Liberating resources for prudent risk taking that contribute to higher productivity and more resilient livelihoods.

R4 links labor-based safety nets that provide cash or food to rural households, with the four risk management strategies to facilitate the application of the program at a large scale and low cost. The focus on safety nets and linkages to financial markets enables uptake by governments and fosters private partner partnerships, thereby ensuring sustainability through the institutionalizing of the R4 approach through private and public entities.

Through a contracting process that was managed by the SDC, Mr. Mathieu Dubreuil, a Resilience Specialist from World Food Program (WFP) was engaged for the assignment. He conducted field work in the project locations in Erati from the 20 – 21st June 2018. The Consultant engaged with several project stakeholders including savings groups members, agro dealers, output buyers as well as the local leadership.

InovAgro is now awaiting the draft feasibility report from WFP. The results from this study will be presented and discussed briefly at the Annual Planning Meeting in Quelimane in November 2018.

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Conclusions The following are the key conclusions in relation to the implementation of gender and resilience interventions. The available annual budget for these two interventions is small, 12,000 USD per year. The PFU needs to consider its future interventions very carefully to ensure that this amount is utilized on activities / partnerships that will likely unlock the most potential and results. During the current year, all the available resources was channeled towards the development of the Gender strategy which will act as the framework to guide future interventions.

Gender A. The InovAgro Gender Strategy has been well received by most of the project partners. The project’s public and private sector stakeholders understand the importance of putting gender at the center of their work but require technical backstopping to build concrete action plans to transform their willingness and intention to be gender inclusive into concrete action plans. B. Ms. Nina Blid – the STTA who supported the PFU to develop the Gender Strategy for Phase III is an able resource that the project can rely on for continued technical backstopping particularly for the capacity strengthening of the project Gender Champion. The fact that she resides in Maputo – where the project Gender Champion (Eduarda Veiga) also resides lightens the cost and logistics related to her engagement for short backstopping assignments.

Resilience A. The index insurance product that Hollard Mozambique intends to roll out could potentially transform risk mitigation strategies employed by the smallholder farmers in the project locations to manage risk. The product design must be done well and InovAgro believes Hollard Mozambique requires experienced technical backstopping to ensure that the design is right and that sufficient incentives between the involved actors (particularly the participating seed companies) are attractive enough to glue the relationship together long term. B. The pricing of the insurance package should be pegged at the right levels to ensure that the cost of seed does not become too expensive for the smallholder farmers. Regardless of the result from this initiative, it is important to ensure that the lessons to be learned are documented well to guide future efforts in the same industry as Agricultural Insurance remains a key constrain at present. C. The results from the resilience R4 feasibility study in partnership with WFP will provide a base upon which InovAgro can structure its resilience interventions during the next two years of project implementation. These efforts will set the base for the follow-on project that SDC will roll out in 2021. The Annual Planning Meeting in Quelimane should be used to discuss the study results and secure consensus on the approach that InovAgro should follow based on the recommendations that will emerge.

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Draft Work Plan 2019

2018 2019 Component Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Gender Conduct workshop to support private sector partners to develop company Gender Action Plans in line with best practice Establish public and private sector committee for the establishment of guidelines for gender inclusion and integration during input field days and fairs. Disseminate proposed guidelines for Gender Aware Field Days in the project locations Establish partnership with a Community Radio and operationalize a radio programme on women and agriculture in Mocuba Conduct workshop on Women in Agribusiness as a platform for exchange of learning experiences by women in agribusiness activities supported by the project to inform the production of a policy brief for submission to the Ministry of Women Affairs and Industry and Commerce. Resilience Finalize deal negotiation with Holland Mozambique

Implement agreed deal with Holland Mozambique on Index Insurance in the project locations Review the Resiliency Feasibility Study Report from WFP and explore opportunities for inclusion of some recommendations in the current Phase III of the project Partnership and Conduct quarterly partnership review meetings and adapt Knowledge interventions as may be required Management Develop video documentary on the Women Entrepreneurs in Agribusiness: Opportunities and Constraints

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Section 10: Project Operational and Governance This section is structured to provide details on the project operational governance activities conducted during the reporting period. The PFU acknowledges that a strong operational framework is required to guarantee the effective delivery of Phase III and the milestones achieved during the reporting period are discussed below:

Project Staffing, Retention and Capacity Development All staff required for the implementation of Phase III were recruited during the reporting period. The Deputy Team Leader, Mr. Carlos Mugoma brings to the team years of experience of work with both public and private sector stakeholders. Carlos has settled well in the role and has continued to receive technical backstopping from the Team Leader to prepare him to eventually take over leadership of the project in 2020. As part of this preparation, Mr. Mugoma has been enrolled to participate in the November 2018 training at Springfield on Market Systems Development. Ms. Eduarda Veiga was engaged from 1st June 2018 as the Knowledge Manager, doubling also as the Project Gender Champion. The Intervention Managers who have been engaged were all part of InovAgro Phase II and as such are familiar with the project approach and have established relationships with the project partners. Mr. Paulo Muchave, previously MRM Director with IFAD continues to make progress in steering the project monitoring and results measurement work ensuring compliance to best practice as defined by the DCED standards. Recently, Mr. Octavio Machado, who had served the project as the Monitoring and Results Measurement Manager resigned from the project having secured an opportunity to join Technoserve in Maputo to assume the role of Monitoring and Results Measurement Manager. Although InovAgro was sad to lose a long serving member of the team, the PFU understands that the project staff, having received years of training on the project will always be the target of other projects. The PFU however also considers the work culture, terms and conditions of service offered to project staff to be competitive to guarantee the retention of the human skills required by the project.

Figure 62: Project Organogram

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Ms. Daniella Armoni who had also served as the London Based Project Manager moved on in June 2018. Daniella has since been replaced by Ms. Elena Bellitto who has been working with DAI Europe for several years in a similar role. A team building session was conducted in June 2018 to thank Daniella on her work over the past years and to welcome Elena as the new project Manager.

Figure 63: InovAgro and FSDMoz project teams in Maputo Project Coordination Office in Maputo To facilitate improved coordination between the project and various high-level stakeholders (Government Ministries, Multi Stakeholder Platforms, Donor Agencies, and Senior Management Staff for other projects), a small satellite office has been opened in Maputo. To reduce costs, the office space is shared with another DAI project (FSDMOZ) and it is now the main operating base for the project Team Leader, Monitoring and Results Measurement Manager and the Knowledge Manager. In addition, the office also has hot desks for visiting team members and/or short-term experts. A board room is also available to facilitate meetings with relevant project stakeholders.

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Financial Audit BDO auditing firm was engaged to conduct the financial audit of all project accounts related to InovAgro Phase II Year 4 (January – December 2017). In addition, the Terms of Reference also required the Auditors to conduct a financial reverification of the project accounts for previous years (2014 – 2016). The field work was conducted by the Auditors at the PFU main office in Nampula during the period 01 – 13 April 2018. The audit report has been submitted to SDC and as per the Management letter received from BDO, no anomaly in the use of project funds during the entire Phase II period has been registered.

Strengthening project IT Most of the project laptops had been purchased in 2011 at the start of the InovAgro Phase I. They were now old and needed to be substituted to provide the PFU team members with suitable machines for the delivery of their work. In this respect, 13 new laptops were acquired and fitted with appropriate software packages to aid project management. In addition – a server was also installed to facilitate the effective backing up/storage of all project documents, a process which is now triggered automatically daily. The project also benefits from an IT manager who has been engaged by DAI Mozambique to provide regular support to the InovAgro PFU (and other DAI projects) to ensure that all IT protocols are managed effectively in line with defined operational company standards. All project staff members have completed, as DAI Europe requirement, the IT awareness training on September 5th, 2018. This training provides the code of conduct for the use of IT as a professional instrument of work to aid project delivery.

Upholding Ethics for Good Practice InovAgro has a zero tolerance to fraud and harassment at the office. InovAgro is also aware of the risks related to potential abuse of project beneficiaries by staff and partners at various levels. In this respect, the PFU management provided training to all project staff on Ethics that they need to uphold during the delivery of their work relating for instance to respect to local cultural norms, protection of the rights of all project beneficiaries as well as values that need to be respected at the work place to promote effective team work. All PFU staff have signed commitments to uphold these ethics of good practice in the delivery of project work. A whistle blowing mechanism was also shared with the project team to facilitate early detection and reporting of malpractice which could affect project standing on the market and brand.

Rolling out of the RFRS Accounting System Previous audits reports had emphasized the need for InovAgro to operationalize use of an accounting software which would enable improved financial management by the project. In line with this recommendation, the RFRS software was rolled out at the start of the year. All project accounting staff were also trained in the use of the software in March 2018 in Maputo. The rolling out of the RFRS is enabling live entry of vouchers at the point of transacting Figure 64: Training of the Ops team in Maputo and more effective management of

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bank balances. This system has enabled the early detection of errors in entries and has also enabled InovAgro PFU to comply with all previous audit recommendations.

Security Management InovAgro considers the security of staff and assets as a critical project management function. In this respect, the PFU has developed and operationalized a security policy which provides guidance on field operations and the conduct that PFU team members should uphold to protect their security, safety and comfort. The PFU management team has also delivered a training to disseminate the DAI and project security protocols in a bid to enhance staff security awareness and promote collective responsibility.

Figure 65: PFU staff attending the global security training at the Nampula Office Operationalization of TAMIS The operationalization of TAMIS47 has taken much longer than had been anticipated by the PFU management. Eurico Julio, the Project Operations Manager, has been appointed as the Project TAMIS Champion. During the reporting period, two trainings were conducted in Maputo and Nampula for capacity building of the project team members on TAMIS as a project management tool. The trainings were delivered by Dan Langfitt, the TAMIS Champion for INOVA, another DAI sister project, affirmation of the growing collaboration and sharing of strategic resources between the two projects. At present, the PFU is engaging with the London Head Office on the structural design changes that are required to adapt the system to InovAgro requirements. The PFU remains committed to ensure the full operationalization of TAMIS before the end of the year, 2018.

47 TAMIS is an online project management tool which enhances sharing of critical project information by team members in various locations. The software will also enable the transformation of most project management processes into a paperless process without however losing the audit trail required to protect the integrity of administrative and financial transactions

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Draft Work Plan 2019 2018 2019 Component Activity Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Administration, Submit revised budget phasing for Phase III Logistics and Submit project financial statements for 2018 Financial Engage Auditing firm to review project books and transactions for Management 2018 Conduct Audit for 2018 Conduct monthly financial recons to ensure expense tracking and compliance to approved budget Operationalization of TAMIS for project management Update project suppliers list and conduct training for selected suppliers Human Resources Recruit replacement MRM Officer Develop Project Training Strategy for 2019 Conduct Refresher Training on Ethics of Good Practice Conduct Team Building Sessions for Oneness Develop Team Performance Objectives for 2019 Security Conduct quarterly security reviews and update security policy Management Conduct refresher training for staff on security management

Partner Conduct refresher training for all project partners on grant Management management Conduct partner due diligence reviews to inform partnership decisions and deal management

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Section 11: Conclusion The project interventions above provide a wide array of learning. Several conclusions can be derived as discussed below:

Political Economy in Agribusiness Development A stable political economy environment is of paramount importance to stimulate sustainable agribusiness development. The recent positive progress relating to the peace negotiations between the Government and RENAMO has provided the business community in Mozambique with renewed hope of a stable business environment particularly in the North. The peace prospects provide a conducive environment to attract increased investments from entrepreneurs but government needs to inject more capital particularly to develop public infrastructure in the project locations to ease logistics and the convenience of doing business. A peaceful environment which is not backed by strong public infrastructure will continue to limit business performance. Monetary reforms to stabilize the meticais against international currencies remain key to position agribusiness entrepreneurs competitively on the market.

Phase III Take Off The milestone achievements that have been secured during this reporting period have positioned the project for a firm Phase III take off across all the intervention areas with new and old partners. The PFU has managed to secure competent staff, with diverse skills, to lead the delivery of the project over the next three years. In addition, the project portfolio of public and private sector partners has also significantly expanded during the reporting period. The larger partner portfolio base is expected to strengthen innovation in the delivery of interventions, enhance positive competition and increase the outreach, depth and sustainability of the project interventions.

Strategic Alliances and Repositioning by Companies in the Input and Output Sectors The InovAgro PFU has noted that the market entry of new input and output marketing companies (e.g. SEED Co, Group Royal, upcoming CORTEVA) has re-energized and accelerated market actor’s efforts to establish strategic alliances to strengthen market competitiveness and survival. JNB for instance increasingly is establishing contact with Klein Karoo and SEED Co to explore potential for positive collaboration. PANNAR Seeds also initiated an in-depth process of company business model review and repositioning on the market to protect its competitiveness. InovAgro will continue to play a neutral facilitatory role to promote the cementing of win - win inclusive collaborations between various market actors. The project acknowledges that as the crowding in of market actors intensifies now and in the coming years this wave of repositioning by the private sector companies will be inevitable as they try to secure their relevance and sustainability of services provided on the market.

Strengthening Mozambican Farmers Participation in Global Agribusiness Markets The past two agricultural seasons have increasingly demonstrated how Mozambican smallholder farmers are increasingly embedded in global value chains. Indeed, the performance of the country’s agribusiness sector is increasingly dependent on the production trends and policies enacted by other countries. The policies enforced by the Indian Government relating to pigeon pea imports into the country in 2017 for instance, continues to generate significant price uncertainty on the local pigeon pea markets and reduced product demand by output buyers. Imports from other countries within the region (particularly maize from South Africa and soya beans from Malawi) have also proved to be major determinants in commodity farm gate price setting thus in turn impacting on smallholder farmers revenues and profitability. InovAgro takes

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note that as Mozambican smallholder farmers establish their place on the global agribusiness markets – the key to their sustainability and competitiveness lies on enhancing farm productivity and improving the effective management of production costs.

Continuous Learning and Adaptation As the project progresses towards increased crowding in and expansion of beneficiary outreach, new challenges emerge and these require effective monitoring and adaptation of the growth models employed by the project public and private sector partners. This is critical to ensure intervention sustainability. The ongoing work with input companies, output buyers, financial institutions, VSLAs as well as with land management committees all requires careful intervention performance monitoring to ensure that new learning is captured and that promoted models keep pace with dynamic markets which are continuously changing (and presenting new opportunities). The continued relevance, uniqueness and value addition of InovAgro on the market will largely require the PFU to have elaborate faciliatory skills that will enable the project partners to strengthen their systems for early detection of market changes, opportunities and risk control and to adapt their commercial models to be able to sustainably provide service to increased beneficiaries often scattered in various geographical locations.

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