Identifying Income Generating Opportunities in Root Crops

Preliminary Cost Benefit Analysis of Options for Improving the Availability of Locally Produced Root Crops in South Tarawa

JULY 2019

Acknowledgements

This analysis represents an output from a cost-benefit analysis training conducted in South Tarawa in September 2018. I am exceptionally grateful to the Ministry of Environment, Lands and Agriculture Development’s (MELAD) staff, in particular Beraina, Susana, Kiritian and Iuta for their commitment to completing the analysis and hope that they will find the techniques learnt valuable in their future work. Kam rabwa to the traders and retailers that participated in the value chain analysis – both at the workshop conducted by MELAD and those that were interviewed subsequently. I am indebted to Richard Beyer and SPC for sharing his insights and feasibility assessments for an agro-processing facility on Buitaritari which fed into the analysis. This analysis would not have been completed without the fantastic support of Norma Rivera from the Global Green Growth Institute in Kiribati for her unwavering commitment to facilitate all the logistical arrangements, her patience and her technical input to the study.

Author

Marita Manley, Talanoa Consulting. Consultant for the Global Green Growth Institute

The Global Green Growth Institute does not make any warranty, either express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or any third party’s use or the results of such use of any information, apparatus, product, or process disclosed of the information contained herein or represents that its use would not infringe privately owned rights. The views and opinions of the authors expressed herein do not necessarily state or reflect those of the Global Green Growth Institute.

Cover Photo: Babai Pit, Abaiang. Photo Credit: © Norma M. Rivera Acronyms

AusAID Australian Aid Program A$ Australian Dollar BCR Benefit-cost ratio CBA Cost benefit analysis FAO Food and Agriculture Organization of the United Nations GGGI Global Green Growth Institute GoK Government of Kiribati KSSL Kiribati Shipping Services Limited KV20 Kiribati 20 Year Vision MCIC Ministry of Commerce, Industry and Cooperatives MELAD Ministry of Environment, Land and Agricultural Development MHMS Ministry of Health and Medical Services MFED Ministry of Finance and Economic Development OB Office of the President NPV Net Present Value SPC Secretariat of the Pacific Community Contents

Executive Summary 1

1. Introduction 3

2. Background 5

3. Methodology and Options Considered 10

4. Limitations 16

5. Preliminary Results and Sensitivity Analysis 20

6. Discussion 22

7. Recommendations 24

References 26

Annexes 27 Annex 1: Value Chain Mapping Analysis: Pumpkins from Buitaritari - Tarawa 27 Annex 2: Stakeholder Consultation List 34 Executive Summary

Cost benefit analysis (CBA) can be used as a To realise the livelihood benefits of the decision-support tool to assess the benefits various options, any further development of investing public funds in different options of this options should be done with the full designed to stimulate economic activity and participation of all existing actors in the livelihood creation. value chain (farmers, traders, agricultural The Government of Kiribati (GoK) extension officers, transport providers) to requested support from GGGI to conduct a ensure that investments are suited to their Cost Benefit Analysis (CBA) training for local needs. government officials as a tool for assessing The following recommendations resulted green and climate resilient development from the analysis: projects to support livelihood development. Following the training one of the CBAs Invest Small and Learn by Doing planned during the workshop was completed to demonstrate the use of the tool. Staff Investing in small-scale agro-processing from the Ministry of Environment, Land with appropriate training and business and Agricultural Development (MELAD) support services provided to producers and designed the analysis and participated fully traders should proceed and represents a in the collection of data, development of low risk option for government investment. assumptions and completion of the analysis. Larger investments are possible once the viability of small-scale investments has been This preliminary analysis documents demonstrated1. the results of a CBA that assessed the following options: investing in a central While a new market facility has benefits, market in South Tarawa, investing in solar- further examination of lower cost options freezers on outer islands to promote trade for improving and expanding existing in frozen products, and investing in small roadside market facilities – as distinct from agro-processing facilities to promote the constructing a new market facility – should development of value-added products. also be explored. The existing market for pumpkins has developed without significant The preliminary analysis concluded that all investment in infrastructure and could be options considered are potentially viable replicated for sweet potato. under certain assumptions (see Section 5). Further data is needed – relating to maintenance and running costs of the various investments, the feasibility of transporting frozen goods and additional interviews to inform the estimates of the size of the market - to improve the robustness of the results.

1 In this case, a micro investment is below A$ 5,000; small investments equal A$5-100k; medium investments equal A$100,000-A$500,000 and large investments are above 500k+ 1 Support Existing Value Chains Demonstrate Viability of the and Private Sector Actors Market for New Products

It is important that MELAD and MCIC work MELAD and MCIC have an important role jointly to support existing value chains and in helping to stimulate as yet untested private sector actors and ensure that work products and market opportunities and to to stimulate additional production does not give traders and other private sector actors undermine existing value chains. confidence to enter the market. Part of this It is also clear that existing value chains have role can simply be to connect existing actors constraints that could be addressed. For to each other. example, wastage in the existing pumpkin The MELAD trials for root crops should value chain is high (approximately 20%) continue to determine the viability of the and working with producers and traders to market in terms of taste, quality and price identify options to improve post-harvest preferences. handling could result in additional supply. Working with existing traders to do this Producers also reported pest and disease would help to stimulate their interest in the issues that could be addressed by MELAD market. For example, MELAD ideally should extension services. not be selling any produce itself but simply To ensure local and affordable food is facilitating others to do so as part of the available for consumers in South Tarawa it trials. is critical that existing value chain actors are supported to strengthen the current fragile Improve Availability of Data value chains. to Support Analysis Value chain analysis can be a useful tool in helping to identify specific constraints This study was constrained by the limited and needs. Training in value chain analysis information available for domestic should be conducted so that MELAD and production and trade of agricultural goods. MCIC staff are able to conduct this for all Investing in improving data availability to commodities they are working on. support informed decision making is critical for value chain and/or cost benefit analysis to be conducted regularly.

2 1. Introduction

This report outlines the results of a The GoK requested support from GGGI preliminary cost benefit analysis (CBA) to conduct a Cost Benefit Analysis (CBA) in partnership with the Government of training for local government officials as a Kiribati as part Global Green Growth tool for assessing green and climate resilient Institute’s (GGGI) work in Kiribati. The development projects to support livelihood analysis was completed to demonstrate the development. Following the training one of application of the CBA framework and to the CBAs planned during the workshop was support decision making relating to various completed to demonstrate the use of the agricultural initiatives to support agriculture tool applied to a specific project. and green job development currently under CBA training was conducted in September consideration. 2018 for officers of the Ministry of GGGI is an international, inter-governmental Environment, Land and Agricultural organisation working to promote a resilient Development (MELAD), the Ministry world of strong, inclusive, and sustainable of Finance and Economic Development growth (GGGI, 2018) targeting key aspects (MFED), and the Office of the President of economic performance such a poverty (OB). reduction, job creation, social inclusion, and The training was aligned to GGGI’s focus environmental sustainability. In delivering area in Kiribati to strengthen integrated country programmes, it works across the planning approaches, the evaluation of thematic priorities of sustainable energy, green and climate-resilient projects and green cities, sustainable landscapes, and the identification and assessment of water & sanitation. sustainable micro-scale income generation Kiribati is a founding member of GGGI and opportunities. It included practical exercises deposited its Instrument of Ratification and participants planned a CBA within their in 2012. The focus of GGGI’s activities is own work areas. to support the GoK identify and support Officials from MELAD identified the issue micro income generation opportunities, of a lack of affordable and reliable local improve availability and access to green agricultural produce for consumers in infrastructure services for the achievement South Tarawa – and the resulting health of development objectives and share problems arising from a reliance on knowledge on integrated planning processed, imported rice – as a problem approaches for climate change adaptation that they wished to analyse in more detail. and green growth (GGGI, 2018). GGGI’s They identified high levels of wastage due Kiribati Country Planning Framework will to poor post-harvest handling and transport be completed in 2019. services, limited shelf life of produce, lack of facilities to market produce and limited opportunities to value-add at source as key problems within the current value chains.

3 The solutions to these constraints can Following the workshop, officials from provide an opportunity to create green MELAD gathered data required to complete jobs and livelihood opportunities to people the analysis. Data availability constrained in the outer islands while providing locally the level of detail at which the analysis could produced food to the capital of South be conducted. Tarawa. The MELAD team identified three The analysis was conducted as a learning options for potential investment projects: exercise and makes several assumptions 1. Investment to construct a central based on expert opinion (as described market for producers and traders to below) to simplify the analysis or account bring produce from the outer islands to for the lack of data. The process of gathering retail in South Tarawa the necessary information to complete the 2. Investment in solar freezer storage analysis generated useful discussions (see on nearby outer islands and in South Sections 4 and 5) about the appropriate Tarawa to allow root crop producers and way to stimulate agricultural production traders to supply frozen root crops to in Kiribati that can feed into wider policy South Tarawa discussions. 3. Investment in small scale agro- processing on Buitaritari to produce higher value, processed products with a longer shelf-life at source.

Photo 1: One of the largest market in South Tarawa, the market in Bikenibeu is surrounded by other smaller stalls.

4 2. Background

The Republic of Kiribati is an island nation food security and provides some income in the Central Pacific, consisting of 33 atolls generating opportunities. and reef islands and one raised coral island, The private sector is relatively small but its Banaba. Kiribati’s islands have a total land contribution to GDP has increased from mass of 726 km2 and are spread over 3.5 47.3% in 2005 to 54.5% in 2015 (KV20). million km2 of ocean. (Ministry of Health, Business registration records highlight that 2017). Like many Small Island Developing most registered businesses are located in States, Kiribati is highly vulnerable to climate South Tarawa (1892) and Kiritimati (232). change and affected by its impacts including The other 19 islands, for which data is rising sea levels, increasingly frequent and recorded, have less than 100 registered severe storms, permanent erosion of the businesses each (KV20, based on MCIC shoreline, frequent seawater inundation on business registration records in 2017). fresh water resources, and reduced food security. The country also faces a number The Kiribati Vision 20 (KV20), Kiribati’s “… of structural economic challenges given its long-term development blueprint for the remoteness, small market size and limited period 2016-2036.”, (OB, 2017) focuses on institutional capacity (GGGI, 2018). the development of two main industries, fisheries and tourism. New initiatives to The economy of Kiribati is based on support the KV20 will focus on providing agriculture, development assistance support to fisheries and tourism. On the fisheries, fishing licences, and remittances. agriculture side, the document states that Due to lack of natural resources in atoll there is “…weak and/or absence of essential environments, for the people living on the infrastructure and supporting mechanisms outer islands, opportunities are largely to facilitate large scale production for limited to agriculture and fisheries, tourism. domestic trade”. This CBA is one step Creating additional livelihood opportunities towards identifying these constraints and could potentially reduce migration from opportunities in agriculture development the outer islands and release pressure on that can increase domestic trade and create the capital, where 50% of the country’s livelihood opportunities. In conducting this population currently resides. CBA, GGGI also supports Key Priority Area Unemployment is particularly a problem 2: Economic Growth and Poverty Reduction for women and young people. Women’s and Key Priority Area 4: Environment of unemployment rate is 47% (MWYSA, the Kiribati Development Plan (KDP 2016- 2019); in 2010, 54% of youth were 2020). 2 unemployed (MFED, 2016) . Many young GGGI’s support to Kiribati aims to people are also underemployed, particularly strengthen and green the private sector, on outer islands. Poor soils and limited including small scale business, increase food freshwater availability constrain agricultural security with integrated and sector-specific opportunities, but the sector does make approaches and promoting healthy and a significant contribution to domestic resilient ecosystems.

2 http://www.mfed.gov.ki/sites/default/files/Economic%20 other 20 inhabited islands range from Arore with 268 inhabitants Outlook%20April%202016.pdf to North Tarawa with 6,629 inhabitants. The tourism sector in the 3 According to the 2015 Population and Housing Census, the country is concentrated in South Tarawa and Kiritimati, where population of South Tarawa is 56,388; the population of Kiritimati, international airports and seaports are located. (OB, 2017) Kiribati’s second urban center, is 6,456. The population of Kiribati’s 5 Farmers in remote atolls face various Domestic trade is constrained by limited inherent challenges - land availability, poor primary production, limited supply soil conditions, pest and diseases, high cost infrastructure including shipping, poor of inputs, and a lack of market; however, in producer – market links and limited cold Kiribati, there are several islands capable storage facilities that can extend the shelf of producing larger quantities of fruits and life of agricultural products for which there vegetables such as root crops: is demand on South Tarawa. 1. Buitaritari 2. Makin The Problem - Existing 3. Marakei Constraints Domestic markets on these islands are small, South Tarawa relies heavily on imported given the size of their population. To sustain food – particularly carbohydrates (rice, flour, small agricultural businesses, producers and and potato fries) and frozen vegetables. This traders transport produce to South Tarawa reliance, coupled with limited availability of or Kiritimati, where the population is larger3 locally grown fresh produce, has contributed and availability of fresh produce is lower. to poor diets. Thus, there are negative Despite the apparent opportunities implications for the health of the nation available to outer island producers to expand where life expectancy is estimated at 61.7 their production and increase their supply years for males and 72.1 years for females to South Tarawa, their ability to capitalise (2017, Annual Health Bulletin). on these opportunities is hampered by Diabetes and heart attacks rank number various infrastructure constraints along one and two as the leading causes of the value chain. These include a lack of death (2017, Annual Health Bulletin) dedicated cargo space for fresh produce in placing significant costs on government transportation vessels, lack of cold storage infrastructure, services and society. on vessels and in markets, and low general knowledge about post-harvest handling MELAD staff have identified the lack of a practices. These constraints result in losses central market and inadequate cold storage at each stage of the value chain and reduce facilities both in Tarawa, on nearby outer the confidence of farmers and traders to islands and on shipping vessels as some of the reliably supply the market and generate constraints to the expansion of production suitable returns on the time and resources and trade from nearby outer islands such invested. as Buitaritari, Makin and Marakei. These islands have land and labour availability to Inter-island trade is dominated by imported grow and supply more produce to South products, such as sugar, flour and rice, and Tarawa if viable business opportunities were while the GoK has implemented various available (pers. comm MELAD). initiatives4 to boost the volume of local produce and products traded, there remains Currently, most outer island produce5 is an undersupply of affordable and nutritious sold at small roadside stalls across Betio local foods available on Tarawa (pers. comm and South Tarawa. Bananas and pumpkins MELAD). are the main crops coming in from the outer islands (FAO, 2011).

4 For example, all traders of agricultural produce from the 5 outer islands to Tarawa can claim back the cost of their freight Produce originating from the outer islands includes: babai, from the Ministry of Finance through a freight subsidy. banana, breadfruit, cassava, fresh coconut, fig, pawpaw, pumpkin $1m a year is allocation to this scheme https://kiribatinews. and sweet potato; these originate from the islands of Buitaritari, co.nz/2018/11/29/2019-budget-speech-by-kiribati-minister-of- North Tarawa, Makin, and Marakei (pers. comm MELAD). finance/ 6 MELAD staff believe that the lack of a central Retailers seemed unwilling to take risks on market results in traders having additional stocking new produce (pers. comm MOEL transaction costs (largely transportation Trading) but would stock the produce and time) that discourages them from provided the consistency and reliability of bringing produce from the outer islands to the value chain had been demonstrated. sell in South Tarawa. Further analysis and The constraints in regularly supplying focus group discussions with traders are the main urban centres in South Tarawa, required to validate this assumption. highlighted above, reduce the incentives for A significant issue to address is that of farmers to transition from subsistence to wastage on domestic shipping vessels, the semi-commercial agriculture. primary cause of post -harvest loss. This To better understand the possible livelihood could be reduced by improving post-harvest opportunities that could be created from handling and using crates and/ or boxes to an expansion of infrastructure to support transport produce. These are specific post- value chains for various root crops supplied harvest storage containers are not used to South Tarawa from the outer island, widely and produce is rarely cleaned before the current value chain for pumpkins was shipping. Pumpkin traders shared that analysed to identify the main actors involved average wastage of total volume produced and opportunities that might be available is around 20% due to poor transport for other fresh products. This value chain conditions. This wastage must be factored in functions well with several farmers and to current pricing as fresh produce remains traders supplying wholesalers, retailers relatively expensive and beyond the means and restaurants in Tarawa. A 2011 study by of many South Tarawa residents. FAO estimated the weekly market size for This analysis does not consider specific pumpkins at around 900kg/week. For the investments in improved post-harvest purposes of this study the main traders were handing and transportation options but interviewed and the estimated market size given the large proportion of spoiled for pumpkins has increased to approximately produce, supporting traders to examine 2000kg per week6. The hospital is a major options to reduce this should be facilitated consumer of local produce. The value chain by MELAD staff in partnership with existing for pumpkins was evaluated (see Annex traders. 1) to better understand the distribution Retailers in Tarawa currently stock frozen of benefits across the chain and to ensure taro and cassava from Fiji. In order for local that assumptions on the possible size of the traders to be able to trade frozen root crops, market for other local crops were realistic. freezer storage facilities would be needed The value chain analysis for pumpkins at packing facilities and on shipping vessels. highlights that pumpkin producers / farmers This could extend the shelf life of root crops enjoy a relatively large share of the total (sweet potato, babai and cassava) traded proportion of the sales price for pumpkins from the current few days to a few months, in South Tarawa (approximately 45%). This but at significant additional cost. MELAD supports the hypothesis that improving the staff have been trialling the shipment (via infrastructure and business environment air freight and shipping) of frozen root crops were to support additional agricultural value from nearby outer islands to South Tarawa chain development would have significant to test their acceptability in the market. benefits for producers.

6 Estimated from discussions with current traders but a more comprehensive market assessment is suggested as a pre-requisite for completing the analysis 7 Trials of Domestic lower prices to producers once a precedent has been set. Taking producers through Root Crop Trade the value chain and the costs that a private trader would have to cover is a useful MELAD recently trialled facilitating the exercise that MELAD staff could conduct trade of sweet potato, babai and cassava with producers on these islands. on four separate consignments to South Tarawa between May and November 2018 Results of the Trial to test market acceptability. MELAD extension services worked with Produce was provided to various retailers the Island Councils to act as a collective to taste and ascertain acceptance (taste, marketing organisation. The Island Council quality) for the produce and to seek purchased the products from the farmers feedback. (at A$2.30/kg) and the GoK purchased the Feedback from consumers following the produce from the Island Council (at A$3/ trial indicated general acceptance of the kg), covered the costs of the transport frozen and fresh sweet potato. and sold the produce in South Tarawa, with no additional mark-up. In May 2018 Feedback for the babai was generally that it the consignment was vacuum packed and was bland and tasteless when cooked from frozen. Subsequent consignments were frozen. The babai was first tested as frozen sold fresh. upon harvest and subsequently cooked ahead of being frozen. Initial trials provided The prices paid to farmers and the Island feedback that it was better when frozen Council are therefore artificially inflated after cooking. given that they do not incorporate labour (provided by Ministry extension officers) and Feedback provided on the cassava was that transport (paid by MELAD) and are unlikely it was quite bitter. to be viable for a trader entering the market. Selling prices for the trialled products on the Caution should be taken that in attempting trial are given below. to stimulate a new market to ensure it is not being undermined before it is established. • Cassava / Sweet potato - A$3/kg It is difficult to lower expectations and pay • Babai A$5/kg

Photo 2: Sweet Potato & Cassava. Shipment from the outer islands as part of the domestic root crop trade trial.

8 Agro-Processing Opportunities

In addition to looking to increase the identified demand in the South Tarawa trade in fresh produce, another option market. for creating livelihood opportunities in A recent feasibility study conducted for the agriculture sector is by extending the Buitaritari identified several feasible options shelf-life of produce from the outer islands. for small scale processing of root crops, This can be done by facilitating small scale bananas, pumpkins, coconuts and pawpaw agro-processing of crops into a variety of to produce chips and jams. (Beyer, 2018) value-added products for which there is

Photo 3: Pumpkins sold on small market in Nawerewere. Nawerewere, South Tarawa.

9 3. Methodology and Options Considered

In order to assess the various options space and to strengthen relationships identified by MELAD staff as described between buyers and sellers was identified above, a preliminary cost-benefit analysis of as the prime motivating factor among the options below was conducted. farmers and traders for their creation over The following section provides a description and above any immediate cost savings (FAO, of each of the options considered as part of 2009). Ensuring that the space acts as a the analysis. social space that can connect traders and consumers should be a prime consideration in the design of the space. This has Option 1: Constructing implications for example for its location and a Central Market in the facilities included. For a central market to stimulate additional South Tarawa demand, buyers would need to prefer to travel to the market, perhaps incurring This option involves the construction of additional expenditure, to buy their produce a purpose-built facility with improved This may occur if there is greater range of facilities (bathrooms, water) in a central produce available, prices are lower, and/or location (to be determined) that could cater they can combine their vegetable shopping for the needs of traders bringing produce with other activities. It is not clear that this to market and market vendors in South assumption holds however, and a market Tarawa. It assumes that a central facility survey is recommended with consumers to would enable traders to focus on bringing ascertain their shopping preferences as part produce to South Tarawa and provide them of furthering the analysis of this option. with increased confidence to do so. It would provide a central hub for buyers to purchase Three possible locations for a central a reliable supply of locally grown produce market discussed during the development stimulating demand – and encourage of this CBA were Bairiki, Bikenibeu and producers and traders to work collectively Betio. South Tarawa’s population of over to increase supply. 56,000 people (GoK, Population Census 2015) are dispersed across the length of Municipal markets have been demonstrated the atoll. While Bairiki represents a business to have positive effects on the local center of sorts it is not particularly close to economy, but care must be taken to ensure major population centers such as Betio and assumptions relating to increased economic Bikenibeu. Betio accounts for 12% of land activity (rather than displacement of existing on the atoll and its population corresponds economic activity) are valid. to 30% of the population of South Tarawa. In an FAO study conducted in Fiji on the Bikenibeu, having a smaller population feasibility of establishing collection centres, density than Betio already has a small market the opportunity to use them as a networking next to the high-school and a second smaller market in the nearby village of Nawerewere.

10 Building a central market in Betio would For the purposes of the analysis, the costs of mean that 30% of the population would a recently constructed integrated fish and have access to agriculture products handicraft market in Bairiki that includes a within walking distance of their small restaurant and washroom facilities residence. This could potentially create have been used as the basis of the costs in a relatively steady demand of these the analysis (A$300,000). products and increase trader confidence, Given the uncertainty related to the possible thus strengthening the value chain. benefits of increased production and sales, It is unlikely that a central market established the analysis provides information on the in any other location would stimulate additional volumes that would be necessary additional local production of existing to make the investment viable. and new agriculture produce. Currently, most consumers shop for fresh produce at Option 2: Installation roadside stalls. Markets in South Tarawa generally have of Solar Freezers qualities of an oligopoly (few buyers and on 3 Outer Islands sellers) and are dominated by a few large traders and producers. As such it is unlikely (Buitaritari, Makin and that additional demand will lower prices Marakei) and in South unless it also creates opportunities for new traders to enter the market. This may occur Tarawa to Enable Trade if the market place facilitates connections between existing and new traders and of Local Frozen Root vendors. MELAD and MCIC should consider Crops (Sweet Potato, including business training for interested traders as part of any market construction. Babai, Cassava) Transport costs in South Tarawa do not represent a significant cost to traders Frozen imported taro and cassava from (see Annex 1) and resulting savings would Fiji is widely available in South Tarawa and therefore be small. retails at A$4.50 and A$3.80 respectively7. Municipal markets are generally operated One trader (importer and retailer) shared by local government and the local council that they are selling over 1000kg of frozen would need to be consulted on their taro and cassava per month. Sales peak willingness to assume responsibility for the around the fortnightly pay day of civil management and the maintenance of the servants and the products are generally facility. The Ministry of Commerce, Industry used for special occasions as they are too and Cooperatives (MCIC) has plans to expensive to be consumed on a regular basis. construct a market in Betio (pers. comm Sweet potato, babai and cassava can be MELAD) and coordination with any projects grown locally and could potentially be led by MCIC is critical to avoid duplication. supplied at competitive rates to imported produce if appropriate infrastructure were available.

7 At Punjas, Betio (Dec, 2018) 11 Stimulating competition for these imported the role of traders in the value chain. products would require investment in Recognising the potential role of public freezers on the outer islands and in South institutions (schools, hospitals, prisons) as Tarawa. It would also require being able consumers and their ability to purchase to transport the products frozen either in bulk can provide a key way to provide through a partnership arrangement with market certainty to traders. MELAD are Kiribati Shipping Services Limited (KSSL), encouraged to work further with potential a state-owned enterprise, or through private and public consumers to complete a investment in freezer capacity on the island more accurate market assessment. vessels. Retailers shared their general unwillingness Option 3: The to stock fresh produce as it can attract vermin (rats and mice) that can damage their Establishment of other products. Small Agro-Processing Farmers, producers and traders would Facilities on Buitaritari need additional training and advice on effective and climate resilient methods for to Develop Locally growing sweet potato and cassava as well as cleaning, packing, post-harvest handling, Produced Value-Added and preservation techniques. Products such as Chips Awareness sessions conducted by MELAD and Jams staff (pers.comm, local trader) about potential options to supply pumpkins to To overcome some of the constraints to South Tarawa have helped to stimulate the supplying fresh produce (limited shelf- value chain in pumpkins from relatively life, high levels of wastage, inconsistent small volumes in 2008 to an estimated and unreliable transportation), small-scale 2000kg/week in 2018. The Tungaru Central agro-processing has been recommended Hospital, a public hospital also acts as a as a viable income generation opportunity major consumer of pumpkins. This regular, for farmers on islands with enough excess reliable demand may have given traders production of locally available crops. confidence to increase the volume of pumpkins purchased from farmers. A production facility built in Temaiku in 2008 failed to stimulate local production In looking to replicate this success it is opportunities as the equipment was designed important to recognise the relatively for a greater volume of raw materials than restricted role played by MELAD in could realistically be supplied. The general providing training and advice. Working constraints to supplying fresh produce to within the boundary of providing training the South Tarawa market also hampered and advice was a successful approach as its operations as a large proportion of the the objective (to improve the value chain produce was spoiled by the time it reached for pumpkins) was achieved. It is critical for South Tarawa (Beyer, 2018). long term sustainability that MELAD staff continue to facilitate but do not substitute

12 A feasibility assessment conducted by the This has been included in the analysis as South Pacific Community (SPC) (Beyer, an additional option for stimulating local 2018) examined the investment required consumption and production. for machinery necessary to establish a small- The options are not mutually exclusive scale processing facility capable of producing and could be implemented simultaneously. chips (banana, breadfruit, pumpkin), jams They are assessed as three options for the (coconut, pawpaw, pumpkin), chutneys and purposes of the analysis. vinegar.

Photo 4: Fish sales area. Photo 5: Local Handicraft sales area and Bairiki Integrated Fish Market. ice plant. Bairiki Integrated Fish Market.

13 Table 1: Description of Options Considered

Without Project Option 1 Option 2 Option 3

Current supply New market in South Availability of solar New agro-processing Description levels of produce Tarawa stimulates freezers stimulates facility stimulates from outer islands production and increases production and increases new entrepreneurs to and Key to South Tarawa supply of produce from supply of frozen produce develop new products Assumptions continue outer islands to South from outer islands to for supply to Tarawa Tarawa South Tarawa

Construction, Purchase, freight, Purchase, management management (including installation, management and maintenance of labour) and maintenance and maintenance of solar small agro-processing Costs costs of new market freezers on Buitaritari, facility at the Buitaritari Makin, Marakei and ice plant South Tarawa

Additional volumes of Additional volumes of New entrepreneurial goods produced and goods produced and activity stimulated, sold by farmers on outer sold by farmers on outer and self-employment islands islands opportunities created

Additional income Additional income Additional income generated by traders generated by traders generated by traders involved in the value involved in the value involved in the value chain chain chain

Displacement of Displacement of Displacement of imported food with more imported food with more imported food with nutritious local produce nutritious local produce more nutritious local produce

New traders encouraged New traders encouraged Reduced wastage of to start operations to start operations partly-spoiled crops – converted to a processed product Benefits Existing traders given Existing traders given New products (chips, certainty to allow them to certainty to allow them to jams, etc.) available in expand their operations expand their operations South Tarawa to new products

Additional economic activity generated by small businesses in the vicinity of the market (restaurants, shops etc)

Reduction in imports Reduction in imports Reduction in imports due to increased due to increased due to increased consumption of local consumption of local consumption of local foods by South Tarawa foods by South Tarawa foods by South Tarawa residents (retention of residents (retention of residents (retention of income within the local income within the local income within the local economy) economy) economy)

14 In the absence of a Government Option 3, on the establishment of agro- recommended discount rate, a discount rate processing facilities is likely to lead to of 7% was used across all options. Sensitivity greater opportunities for women. Women analysis at 4% and 10% was conducted to in Kiribati hold a higher share of childcare test the robustness of the results to the real and household responsibilities (MWYSA, discount rate8. 2019). Women’s unemployment in Kiribati is 47% compared to 36% for men (MWYSA, Livelihood 2019). Agro-processing, which can be done close to home, can provide an opportunity Considerations of the for women to enter the job market while still being able to juggle some of their existing Various Options responsibilities with small-scale income generating opportunities. Each of the options considered above has different implications for the stimulation of Considering the high levels of unemployment livelihood opportunities for farmers on the for women and youth, targeting these groups outer islands. The assumption for all options could provide additional livelihood options is that the stimulation of opportunities specifically for these vulnerable groups. To for traders and agribusinesses will do so, it will be important to target these create markets for producers. Similar to groups for trainings on agricultural value the existing value chain for pumpkins, chains, production techniques and agro- which has stimulated opportunities for processing, and other related trainings. pumpkin farmers that supply traders, It is vital that training for all target groups the opportunities for root crop traders be done in partnership with existing and should lead to opportunities for root crop potential traders that have networks to producers. Within the pumpkin value chain markets in South Tarawa. Trader’s inputs on one trader, who is also a farmer, is now the development of infrastructure options buying from up to 15 additional farmers to should also be sought out as they well suited supply their market on South Tarawa. to provide guidance on what best suits to their needs.

Photo 6: Private Garden, Abaiang, Gilbert Group.

8 These rates have been used in several SPC analyses and are natural resource management in the Pacific. The World Bank recommended in Buncle et al (2016), Cost benefit analysis for generally uses higher discount rates of around 10%. 15 4. Limitations

The options considered as part of the Using the existing market estimate for analysis rely heavily on expert opinion and pumpkins (2000kg/week) it is assumed that assumptions as detailed below. The analysis a local market of an additional 60kg a week should therefore be considered preliminary of additional produce (of any type) in Year 1 and can be added to as more data becomes rising at 3% per annum to 1500kg/ week in available. Year 19 could be supported. South Tarawa’s population increased by a very high annual Market Sizing growth rate of 4.4% between 2005 and 2010. (KNSO, Kiribati Census); therefore, an estimated growth of 3% per annum is Estimating the size of a hypothetical market feasible. (for additional agricultural produce or frozen root crops) is not straightforward giving the Using the existing market estimate for absence of consumer surveys or market imported taro and cassava of 2000kg/ assessments on which to base assumptions. month it is assumed that an initial market in This analysis has had to rely on the existing Year 1 of 150kg/week for sweet potato and market data for pumpkins (as an example cassava and 100kg/week for babai could of a local produce market that has grown exist growing at 5% a year to 380kg/week over the least ten years) and imported for sweet potato and cassava and 250kg/ taro and cassava (as an example of existing week of babai by Year 19. demand for frozen root crops) to make It is assumed that as customers are already general assumptions about the possible familiar with these products that growing size of the local market for all root crops. the market by a slightly higher 5% a year In order to better understand the likely would be possible based on sales prices that magnitude of trade to assess constraints are lower than imported goods. to stimulating livelihood opportunities for farmers, the analysis of the value chain for Cost benefit analysis often suffers from pumpkins guided assumptions made for the optimism bias (i.e. project proponents possible size of the market for root crops. present optimistic rather than realistic For example, if the current market size for estimates of the future). A conservative pumpkins is an estimated 2000kg/week it estimate of potential market size and is unlikely that the market for other crops growth has therefore been assumed. This would be greater than this and in their early assumption should be validated by experts years of production would be considerably familiar with the agriculture sector in lower as the market developed. These Kiribati. assumptions have been tested as part of the sensitivity analysis presented below.

16 Table 1: Key Assumptions Used in Estimating the Size of the Market

Parameter Assumption Further Data Required

Current Production of Pumpkins 2000kg/week Further analysis required to validate – based on extrapolations from discussions with a limited number of traders

Growth Rate of All Root Crops Sold 3% per annum growth rate Useful to compare historical growth rates of at a Central Market pumpkins Examples of production increases from central market construction elsewhere

Market Size and Value for Frozen 150kg /week at A$3/kg Assumes significant displacement of imports or Sweet Potato growing at 5% a year additional demand created Market surveys with consumer should be con- Market Size and Value for frozen 150kg /week at A$3/kg ducted to ascertain willingness to pay Cassava growing at 5% a year MELAD trials should increase selling price / re- Market Size and Value for Frozen 100kg/week at A$4/kg duce purchase price to farmers to better reflect Babai growing at 5% a year market reality

Realising these benefits requires a number of Displacement of different actors to support the value chain as it develops. This includes the island councils Existing Activities (assumed to be managing the facilities on the island), MELAD staff (through expanded The analysis assumes that these government taste trials with consumers and retailers, interventions displace consumer demand extension support to farmers etc), retailers for imported products and this is replaced by (by being willing to stock the products) demand for local products. This assumption and consumers (through their purchasing is critical to the analysis as it allows us behaviour). It is important to emphasise to include the full value of the increased that government support should not extend production as a benefit to the economy. In to substituting for the role of traders in the the case of displacement of imported goods, value chain i.e. they should not be involved the full value of the sales price of the product in buying, transporting and selling produce. represents a benefit to the economy as If the private sector is to be encouraged and every actor involved in the value chain and stimulated to play these roles it cannot do so receiving a portion of the value is additional while the government is actively involved in value created in Kiribati. subsidising the real costs of production. If this assumption of import displacement were not valid and, for example, an increased production of sweet potato and cassava led to displacement of pumpkin consumption and production, the analysis would overestimate the value of benefits.

17 The assumptions of full displacement of selling prices that were realised during the imported products is also partly supported MELAD trails (A$3/kg) but a private sector by the fact that Kiribati (and in particular trader selling at these rates would need to South Tarawa) has a growing population and lower the price paid to producers to account therefore increasing demand for food and for their margins and transport costs. root crops. Detailed cost information was not available for costs such as the maintenance and Data Constraints running costs for all options. They have been assumed to be 2% and 10% of the Obtaining the necessary data to complete capital costs respectively in each option. the analysis was not as straightforward as Accurate cost information should be anticipated. obtained to validate these assumptions. Informed decision making and the use of MELAD staff in South Tarawa did not have tools such as cost benefit analysis relies any up to date estimates of the current on access to reliable data and information. production levels of agricultural crops by Investments should be made in improving island or the number of farmers on each the availability of information by staff at island. Extension officers on each island MELAD responsible for developing project may have this information but it was not proposals and project management. available centrally and not collected during the timeframe of the analysis. The population census provides general Methodological information, but it is not sufficiently detailed Constraints to determine production levels. Price data for existing commodities was Cost benefit analysis is a “marginal gathered through interviews with traders analysis” technique, meaning that it is most and retailers but is not collected regularly to appropriate where the broader environment examine trends over time. (e.g. the price of goods and services in the economy) can be assumed to be unchanged A limited number of interviews took place by the intervention (UK Government, Green with traders and retailers who attended a Book, 2018). It is assumed that none of the value chain workshop. They provided some above options would result in production insights into the value chain for pumpkins changes large enough to alter prices. which was used to estimate the market size and possible constraints for the value chain It is possible, however, that the production for root crops. Additional interviews would increases assumed could disrupt the market provide more confidence in the assumptions sufficiently to lower prices – and indeed this made and should be conducted ahead of any may be desirable from a food and nutritional further analysis. security perspective to improve accessibility to local food for everyone. If this were the There is uncertainty about the willingness of case the analysis presented below is an consumers to pay for untested commodities over-estimate of the benefits. Given that (local sweet potato, cassava, babai). Current South Tarawa’s population (and therefore prices for imported taro and cassava provide market) has been growing at around 4.5% an upper ceiling. The analysis has used the (GoK, 2012)9 per annum over the last

9 Republic of Kiribati Island Report Series. South Tarawa. http:// www.climate.gov.ki/wp-content/uploads/2013/01/6_SOUTH- TARAWA-revised-2012.pdf 18 decade the assumed production growth rates of 3% (Option 1 – Central Market) and 5% (Solar freezers) are unlikely to be large enough to change prices significantly. Other Options that Should be Considered

In discussion with local traders, pest and sellers that enable produce to be sold closer disease issues and wastage emerged as to consumers. As a key function of markets critical constraints on production levels and is to facilitate buyers and sellers coming options to support farmers and traders to together, investing in improvements to the address these options should be considered. facilities of small satellite markets would represent a lower cost and potentially have An additional option to investing in a large as great an impact on stimulating additional central market is to support the existing trade. and expanded network of small road side

Photo 7: Informal roadside market in Taorereke, South Tarawa

19 5. Preliminary Results and Sensitivity Analysis

This section describes the results of each The results are relatively sensitive to the option considered and sensitivity analysis discount rate chosen, and the benefit cost conducted. ratio is only marginally above 1 with a 10% Option 1: At an assumed cost of A$300,000, discount rate. Further discussions with growth in sales of 3% per annum and a MFED officials should be conducted to reduction in wastage from 20% of goods validate the discount rate appropriate to the transported to 10%, the investment would Kiribati economy. generate a net present value of A$222,276. Further sensitivity analysis was conducted The benefit cost ratio is 1.31 – for every as highlighted below for the following dollar invested A$1.31 of benefits to the parameters: Reducing the assumed economy would be generated. growth rate from 3% to 2% per annum and Table 3: Option 1 – Central Market increasing the assumed maintenance costs Construction from 2% of installation costs per annum to 5% per annum. Both of these demonstrate Central estimate that the results are sensitive to the true (7% discount rate, 3% value of these parameters. growth rate in sales) If growth rates are below the projected 3% Net Present Value A$222,276 per annum, the investment of A$300,000 in a central market in unlikely to generate Benefit Cost Ratio 1.31 positive returns. The analysis uses a discount rate of 7%. Table Similarly, if maintenance costs are higher 4 below provides results for discount rates than 2% per annum, the benefit cost ratio of 4% and 10% to examine the robustness drops to 1.1. of the results to a range of possible discount Table 5: Option 1 – Sensitivity Analysis rates. Table 4: Option 1 – Sensitivity Analysis (7% discount (7% discount rate, 2% rate, 5% (4% discount (10% growth rate maintenance rate, 3% discount rate, in sales) costs) growth rate 3% growth Net Present - A$19,217 A$120,256 in sales) rate in sales) Value Net Present A$455,300 A$69,203 Benefit Cost 0.97 1.1 Value Ratio Benefit Cost 1.56 1.11 Ratio

20 Option 2: For an investment of 5 solar In the analysis transport costs associated freezers in South Tarawa and 2 for each with frozen produce were assumed to be island of Makin, Marakei and Buitaritari that twice that of other cargo. However, there are replaced every 5 years, the investment is no accurate information on how frozen would generate a net present value of produce could be transported. Options A$90,524 over a 20- year period. The relating to bringing the produce in on vessels benefit cost ratio is 1.31 – for every dollar currently used for fishing or investing in invested A$1.31 of benefits to the economy freezer storage options have not been fully would be generated. explored. Depending on options available, Table 6: Option 2 – Solar Freezer transport costs could be significantly higher. Investment Transport costs of an additional 200% above current rates would make the investments Central estimate unviable. (7% discount rate) Similarly, the investments in solar freezers Net Present Value A$90,524 are critically dependent on the projected demand and production of frozen root Benefit Cost Ratio 1.31 crops. Lower demand or supply could also result in the investments being unviable. The analysis uses a discount rate of 7%. Table 7 below provides results for discount rates Table 8: Option 2 – Sensitivity Analysis of 4% and 10% to examine the robustness of the results to a range of possible discount 200% Lower Lower additional demand demand rates. The benefit cost ratio is relatively transport scenario scenario insensitive to changes in the discount rate. costs 1 (100kg 2 (75kg Table 7: Option 2 – Sensitivity Analysis week – week – sweet sweet (4% discount (10% potato potato and rate) discount rate) and cassava, cassava, 50kg Net Present A$135,183 A$61,135 50kg babai) Value babai)

Benefit Cost 1.38 1.26 Net - A$27,196 A$8,540 - A$39,809 Ratio Present Value Further sensitivity analysis was conducted to test the assumptions relating to higher Benefit 0.93 1.04 0.83 Cost transport costs and lower initial demand. Ratio

20 Option 3: The initial investments for Table 10: Option 3 – Sensitivity Analysis commencing with small scale agro- processing are small (A$2000) and it (4% discount (10% assumed that these investments would need rate) discount rate) to be repeated every 5 years. Given the low Net Present A$44,102 A$27,032 value of the initial investments, running Value costs of 50% of the value of the initial investment have been assumed. Training Benefit Cost 2.66 2.37 Ratio costs of A$5000 are assumed in the initial year. This option represents the least cost option Critically this option depends on making use by way of investments – and relatively of waste products from the existing banana, good returns, therefore the least risk to pumpkin, pawpaw and breadfruit value government expenditure. chains so the opportunity costs of inputs for Further sensitivity analysis was conducted small scale production are low (assumed to to test the assumptions relating to higher be part of running costs). running costs. The central estimate above Demand has been estimated conservatively assumes running costs per annum of 50% as 50 packs of banana chips and 50 jars of of the initial investment costs. As the jam a fortnight. investment costs are relatively low, this may be an underestimate. Sensitivity analysis Table 9: Option 3 – Small Scale Agro- increasing them to 100% of the installation Processing costs was conducted. With higher running Central estimate costs the investment is still viable with a (7% discount rate) benefit cost ratio of 1.67. Table 11: Option 3 – Sensitivity Analysis Net Present Value A$34,075

Benefit Cost Ratio 2.51 Running costs of 100% of installation costs For the initial investment in small-scale Net Present Value A$22,740 agro-processing a net present value of A$ 34,075 would be generated over a 19-year Benefit Cost Ratio 1.67 period. The benefit cost ratio is 2.51 – for every dollar invested, A$2.51 of benefits would be generated. These results are also not particularly sensitive to different assumptions about the discount rate (see below).

21 6. Discussion

The three options considered above It is also not clear that Option 2 is possible for stimulating production and income as it relies on ensuring that the produce generating agricultural activities in outer would stay frozen during transport (i.e. islands represent vastly different options that a suitable shipping vessel has freezer in terms of investment and complexity for storage). The assumed additional costs to decision makers – ranging from a significant traders to ship frozen goods are therefore initial investment of A$300,000 to construct very uncertain and the results highly a central market to A$2000 to invest in small sensitive to changes in this assumption. scale agro-processing. Table 12: Result Comparison Based on the results of the analysis, the small-scale agro-processing facility has Option 1 Option 2 Option 3 the highest benefit cost ratio. Proceeding Net A$222,276 A$90,524 A$34,075 with Option 3 represents a relatively low- Present risk option for the GoK as there is also less Value uncertainty about the viable market for these products. Benefit 1.31 1.31 2.51 Investing in suitable training at the outset is Cost vital to ensure quality production. MELAD Ratio and MCIC could also play a valuable role in ensuring that the produce is of suitable The analysis demonstrates that improving quality that major retailers in South Tarawa market infrastructure and stimulating a local would be willing to stock it and in helping market for frozen root crops are potentially producers link to the market by introducing viable but further analysis is needed to them to key value chain actors (MCIC, obtain more accurate estimates of the size 2017). of the market and for transport costs. The higher net present values generated by The existing market for frozen taro and Option 1 and 2 have significant uncertainties cassava demonstrates that there is a associated with the results, in particular possible market opportunity, but further relating to the level of additional production testing should be carried out by MELAD to and demand that would be stimulated and determine if local produce could compete further analysis should be conducted to with imported produce based on quality, validate the estimates used in the analysis. taste preference and price. The issue of As shown in the sensitivity analysis above reliable transport would also need to be relatively small changes to the assumed solved. demand result in a negative net present value.

22 Retailers on South Tarawa will not stock produce until the value chain has been demonstrated as being able to produce consistently and reliably so it is also questionable as to whether producers should attempt to compete with a value chain for imported produce that is currently functioning. It is expected that targeting local and roadside markets will be more efficient as they may be more receptive to new products and could help lay the foundation for demonstrating the reliability of the value chain. The analysis also assumes that the interventions result in stimulating additional economic activity, as distinct from displacing existing economic activity. Youth unemployment is high and it is assumed that there is sufficient additional labour at the same wage rates for new economic activities.

23 7. Recommendations Invest Small and Support Existing Value Learn by Doing Chains and Private

Investing in small-scale agro-processing Sector Actors on Buitaritari, with appropriate training It is vital that MELAD and MCIC work and business support services provided to jointly to support existing value chains and producers and traders, should proceed and private sector actors and ensure that work represents a low risk option for government to stimulate additional production does not investment. undermine existing value chains. The feasibility study conducted (Beyer, For example, in working to examine the 2018) also provides options for larger scale viability of additional root crop production investment, should the small-scale agro- it is important that prices paid to producers processing be successful. for trials are realistic (and not inflated) Given the sensitivity of results to the level reflecting a price that traders could pay in of demand, examining lower cost options the future. for improving and expanding existing It is also clear that existing value chains have roadside market facilities – as distinct from constraints that could be addressed. For constructing a new market facility – should example, wastage in the existing pumpkin also be explored. The existing market for value chain is high (approximately 20%) pumpkins has developed without significant and working with producers and traders to investment in infrastructure and could be identify options to improve post-harvest replicated for sweet potato. handling practices could result in additional supply reaching the market. Producers also reported pest and disease issues that could be addressed by MELAD extension services to address. In attempting to ensure local and affordable food is available for consumers in South Tarawa, it is critical that existing value chain actors are supported to strengthen the current fragile value chains. Value chain analysis can be a useful tool in helping to identify specific constraints and needs. Training in how to conduct value chain analysis should be conducted so that MELAD and MCIC staff are able to conduct this analysis for all the commodities they are working on.

24 Demonstrate Viability Improve Availability of the Market for New of Data to Support Products Analysis

MELAD and MCIC have an important role This study was constrained by the limited in helping to stimulate untested products information available for domestic and market opportunities and to give production and trade of agricultural goods. traders and other private sector actors the Investing in improving data availability to confidence to enter the market. Part of this support informed decision making is critical role can simply be to connect existing actors for value chain and/or cost benefit analysis to each other. to be conducted regularly. The MELAD trials for root crops should continue to determine the viability of the market in terms of taste, quality and price preferences. Working with existing traders to do this would help to stimulate their interest in the market. For example, MELAD ideally should not be selling any produce itself but simply facilitating others to do so as part of the trials.

25 References

AusAid (2012). Kiribati country case study: Pacific social protection series: poverty, vulnerability and social protection in the Pacific, March 2012. Australian Government. Beyer, R. (2018). Feasibility Study Food Processing Buitaritari Island. Fiji: South Pacific Community (SPC) (unpublished). Buncle et al (2016). Cost-benefit analysis for natural resource management in the Pacific: A guide. Briantaki, A. (2018, December 3) Personal Interview. KNSO (2016). 2015 Population and Housing Census. Volume I: Management Report and Basic Tables. Kiribati National Statistics Office South Tarawa: Ministry of Finance and Economic Development. Rimon, B. FAO (2011) Kiribati Domestic Market Study MCIC (2017). National Quality Policy 2017-2023. Government of Kiribati MHMS (2017). Kiribati Annual Health Bulletin. Government of Kiribati MFED (2016). Economic Outlook 2016, Kiribati. April, 2016. Accessed January 16, 2019, http://www.mfed.gov.ki/sites/default/files/Economic%20Outlook%20April%202016.pdf MWYSA (2018). the National Policy on Gender Equality and Women’s Development 2019- 2022. Government of Kiribati Office of Te Beretitenti (2012). Republic of Kiribati Island Report Series, South Tarawa. Government of Kiribati Office of Te Beretitenti (2017). Kiribati Vision 20. South Tarawa: Government of Kiribati Veit, R. FAO (2009), Assessing the Viability of Collection Centres for Fruit and Vegetables in Fiji: A Value Chain Approach. AAACP Paper Series – No. 7. June, 2019

26 Annexes Annex 1: Value Chain Mapping Analysis - Pumpkins from Buitaritari, Tarawa

Part 1. List of Actors Involved in the Value Chain

Main actors – (those who buy and sell the product as Supporting actors – (those who provide services it moves along the chain) to facilitate the movement of the product along the chain)

Farmers Caretaker

Farmer / owner Harvester (farmer / owner)

Roadside retailer (farmer / owner) Product loaders (casual labourers)

Consumers Shipping

Transporters / Delivery staff

27 Part 2. Putting Figures into the Map

PRODUCTION Main production done by owners who have their own farm – harvesting around 1000kg every two weeks

PRODUCTION Additional product sourced from 10 farmers on Buitaritari who sell at A$1.20 /kg (approx. $500 worth of pumpkins bought from these farmers every 2 weeks)

TRANSPORT – FARM TO WHARF

TRANSPORT - SHIPPING Transport to Tarawa on the island’s boat - A$350 per consignment. This can be claimed back from the Ministry of Finance and Economic Development

WHARF TO TARAWA Several delivery trucks are used to transport the produce from the wharf to its final delivery location (A$10 to Betio and A$50 to the hospital in Nawere were)

CONSUMER Hospital 200kg - A$2/kg RETAILER Betio – 600kg – A$2.50/kg Waste = about 20%

28 What Each Actor Contributes to the Final Product and the Returns They Receive: Based on a harvest of 1000kg every two weeks:

Actor What the actor The cost of The reward the actor Actor’s risk (participant contributes to the the actor’s receives (share of the in the value final product contribution final selling price to chain) the consumer)

Farmers Prepare land, Time, water Paid A$1.20 of sales Pests, theft, planting, watering, price (A$2-2.50) wastage, weather pest management, conditions harvesting 48-60%

Caretaker Manages the Wages (A$110 Estimated share of Pests, weather farm, watering, per fortnight) consumer price: 5.5% conditions pest management, pollinating

Transport Travels to Buitaritari A$50 boat x 2 Estimated share Wastage (20%) providers to harvest the crop by A$95 flight x 2 of consumer price: for owner / air, returns with the 14.5% harvester (air crop by boat and sea)

Transport Travel from farm to Time, use of truck Estimated share of (truck) wharf A$15 per load consumer price: 0.8%

Transport Transports the good A$350 per Estimated share of provider from Buitaritari to consignment consumer purchase (shipping) Tarawa which is fully price: 17.5% reclaimed from MFED

Delivery truck Deliver produce from A$50 – Betio Estimated importer/ wharf to customers wharf – hospital wholesaler share A$10 in Betio of the consumer purchase price: 3%

Retailer Sold for A$2/kg to Estimated retailers Not all produce is hospital share of the sold consumer purchase A$2.50 / kg price: 11% (retail directly price)

Consumer

29 Value Chain

Pumpkins from Butaritari - Tarawa

Parameters

Based on harvesting 20% waste Abaiang 1.5 farm gate 1000kg - every 2 weeks - price and selling 800kg

Pumpkins harvested 1000

Pumpkins sold 800

Wastage 20%

Selling (retail) price A$2.5

Wholesale price (to govt A$2 buyers)

Actor Price/kg Share

Farmers A$1.2 48.0%

Farm manager / caretaker A$0.14 110 5.5%

Air Kiribati (Flights - for A$0.24 190 9.5% harvesters)

Transport provider A$0.019 15 0.8% (Butaritari)

Shipping (cargo) A$0.43 350 17.5% Subsidized by MFED

Shipping (passenger) A$0.14 100 5.0%

Transport (Tarawa) A$0.08 60 3.0%

Retailer / owner A$0.27 10.8%

30 Financial Analysis

Sample pumpkin farmer / retailer

Parameters

Volume harvested (kg) 1000

Wastage between farm gate and 10% retailer

Volume of sales (kg) 900

Price (wholesale - low) A$2

Price (retail - high) A$2.5

Costs

Pumpkins A$500 fortnight 48.0%

Caretaker (wages) A$110 fortnight 5.5%

Shipping A$350 per 1000kg 9.5%

Flights A$95 pp 0.8%

Ship (passengers) A$50 pp 17.5%

Sales staff A$80 fortnight 5.0% assumed

Transport (Butaritari) A$15 60 3.0%

Transport (Betio wharf - Betio) A$10 10.8%

Transport (Betio wharf - hospital) A$50

Business license fees A$300 per license – requirement: one in Buitaritari and one in Tarawa

Sales 800 kg

Revenue % split Revenue

Hospital / MTC 25% A$450

Retail in Betio 75% A$1687.5

Total costs 1000kg

Pumpkins (from other farmers) A$500

Caretaker A$110

Flights (2 people) A$190 Shipping – freight A$350

Shipping (2 passengers) A$100

Ground transport (Butaritari/ A$75 Betio/Tarawa)

Sales staff A$80

Financial costs

Fortnightly costs (1000kg) A$1405

Annual costs (production) A$28100 20 fortnights

License fees A$600

Total costs A$28700

Revenue

Revenue (fortnight) A$2137.5

Annual revenue (20 fortnights) A$42750

Revenue – costs A$14050

Returns

Annual returns A$14050 Does not account for payments to self

Freight subsidy refund A$7000

A$21050

32 Pumpkin Trade

Domestic trade figures (weekly / kg)

5kg /pumpkin

Traders Volume

Real Trader 1 500 1000kg Buitaritari 1 shipment / fortnight

Real Trader 2 182.5 365kg Buitaritari 1 shipment / fortnight

Real Trader 3 100 10 pieces per boat Abaiang 2 shipments / week

Imaginary Trader #1 500

Imaginary trader #2 500

Volume shipped 1782.5

Wastage (20%) 356.5

Volume sold 1426

33 Annex 2: Stakeholder Consultation List

Name Organisation

Kiritian Batoromaio, Project Officer Ministry of Environment, Land and Agricultural Development (MELAD) Iuta Metai, Project Officer Susana Ratu, Principal Agriculture Officer Beraina Teirane, Senior Project Officer

Norma M. Rivera, Program Officer Global Green Growth Institute

Aribo Briantaki Pumpkin traders Rereti Ioakim Bareti Matia “Timo”

Willie Maen, Operations Manager MOEL Trading

Unavailable Punjas, Betio Office

John Oakeshott SPC

Richard Beyer Independent agro-processing consultant

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