Where CASA works – Malawi
In Malawi CASA uses three different approaches to facilitate investment:
A consultative approach to deliver a more favourable policy and an enabling environment
Work with lenders to make enterprises investment ready
Work with specific enterprises In poultry and aquaculture value chains
The Malawi Investment Summit
In 2023 CASA plans to hold an investment summit in Malawi. This will be a change to review approaches to encourage greater commercial and concessional investment – that develop new opportunities for small-scale producer especially in climate-smart ways. Summits have previously been held in Uganda and Asia.
CASA TAF in Malawi
CASA Technical Assistance Facility (TAF) works alongside investors to identify businesses that, with some capacity building and consultancy, can become investment ready.
CASA TAF works with prioritised enterprises to help them develops inclusive business plan. This becomes the roadmap for the agribusiness to deepen and/or broaden its supply chain and to deliver both commercial and social value to smallholders and shareholders. The business plan is used to agree priorities for capacity building through the delivery of technical assistance. The resulting work plan aims to strengthen supply chains and promote returns and deliver development impact and resilience with agribusinesses sourcing from smallholder farmers.
As part of CASA’s crisis response, technical assistance was also to enterprises experiencing disruptions in their smallholder supply chain due to Covid-19.
Strategy-led poultry and aquaculture value chain development
CASA works within value chains that have growth potential especially in relation to the inclusion of smallholder farmers. The first step is to develop a country specific value chain strategy. In the case of Malawi these are aquaculture and poultry.
SMEs in priority value chains can apply for packages of support – usually small grants and an allocation of technical advisor to address specific business needs. The enterprises are selected because they show significant growth potential. The wider aim is that, collectively, the ten enterprises supported by CASA will address many of the constraints that impede growth along the value chain, as set out in the strategy. These can relate to production of inputs such as feed or finance, application of improved production technologies or market access.
CASA Malawi has been supporting aquaculture and poultry value chain SMEs and producer organisations to prepare for, and secure, investment, bring smallholders into commercial markets.
The success of these interventions led to the CASA Malawi being asked to develop programmes that specifically address the food security this will look at alternative sources of protein for livestock production, and the exploring locally sourced soil improvement products to reduce reliance on imported fertilizer.
Poultry Value Chains
CASA Malawi supported enhanced access to investment for SMEs, and others, in the poultry value chain. Prioritising organisations that seek to drive inclusive growth involving smallholder producers.
CASA provided technical assistance to prepare them for investment and facilitate profitable engagement with small-scale poultry producers, through economies of scale.
Strengthening smallholder poultry commercialisation through improved production, productivity, and aggregation to enhance their access to fair markets and increased incomes.
The Poultry Sector Strategy
The 2020 Poultry Sector Strategy contained three commitments:
1. To Strengthen smallholder farmer aggregation and linkages with commercial market actors in key production areas serving Blantyre, Lilongwe, Zomba and Mzuzu.
2. To facilitate access to finance and investment for market actors by optimising engagement with SMEs seeking investment to drive growth by providing business development support
3. To improve the regulatory and trading environment to create fair market access
Summary of 2020 Poultry Strategy
The strategy highlights significant of poultry in Malawi for as the least expensive source of high-quality protein. An estimated 1.3 million households are rearing chickens. Between 2015 and 2019 production of eggs and chickens roughly doubled.
Poultry plays an important part in poverty alleviation; they are often the only source of cash income for resource-poor households. Rural households typically produce five and 10 chickens over a period of 12-18 months. Investments in the sector have largely been made by medium and large commercial producers (those producing 10 to 100,000 chickens in a batch). The two dominant players enjoy market share of between 70% and 80%. Small- and medium-sized enterprises (SMEs) find it challenging to compete effectively, as they do not have similar economies of scale and typically lack access to finance, markets and quality inputs as there is no distribution network in place. Feed costs are high, which make production expensive.
The lack effective representative bodies contributes to smallholder farmers being excluded them from participating in the core market system. Despite commercial producers operating their own processing plants operating below capacity, they see no value in developing contract farming mechanisms for the industry.
The potential of indigenous and dual-purpose chickens remains largely untapped, due to undersupply but would require concerted commercialisation interventions. There are opportunities for women, reduce poverty and improve the livelihoods in impoverished rural households through indigenous chicken production. Many people prefer the taste of indigenous chicken, and they are perceived to be healthier. Empirical evidence from Nigeria, Ethiopia, Uganda and Tanzania indicates positive results for dual-purpose hybrids (Kuroiler, Sasso and Boschverd). Consumer are concerned about boilers having residual antibiotics and growth hormones and commercial producers brine (add water) chickens to deceive customers.
Business development services are largely inadequate or lacking in the poultry sector, as a result of weak farmer organisations and unproductive or uncompetitive smallholders.
In 2022 CASA was asked by FCDO to explore innovative, climate smart responses to the food security crisis. One of the technologies under review is a pilot programme to commercialise alternative sources of protein for use in aquaculture feed production. This is a pragmatic development to the 2020 sector strategy.
Aquaculture Value Chains
CASA collaborates with implementing partners in the private sector to pilot implementation of aggregation and offtake models and build investment readiness. Partners engaged include producer organisations, SMEs, or organisations involved in facilitating business-enabling environment reforms. Producer organisations focus on better organizing smallholder producers, improving their technical production and entrepreneurial skills. Smallholder groups with enhanced productive capacity, present an attractive platform for mutually beneficial commercial relationships, with SMEs serving as off-takers of fish. With the improved market structure, aggregating SMEs are better positioned to attract third-party investment for growth because of reliable supply chains and enhanced fish supply volumes.
The Aquaculture Sector Strategy
The 2020 Aquaculture Sector Strategy contained five commitments:
1. Improve access to commercial input and service markets.
2. Strengthen and formalise production arrangements
3. To improve the regulatory and trading environment to create fair market access
4. Strengthen SME involvement in the sector through investment and business support
5. Improve the regulatory and policy environment to be responsive to the commercial needs of the sector – to drive competitiveness, open-up markets to small-scale producers, and increase investment.
Summary of 2020 Aquaculture Strategy
The 2020 CASA Aquaculture Sector Strategy States is an important of aquaculture to meet the increasing protein needs and compensate for the dwindling fish catches under capture fisheries. Aquaculture is in its nascent stage in Malawi. However, production rose from about 800 tonnes in 2005 to about 7,672 tonnes in 2016.
The domestic production still falls short of domestic demand by an estimated 20,000 tonnes a year. Because of this gap, the country imports from Zambia alone estimated to average 800 tonnes a year.
The sector supports an estimated 15,465 smallholder farmers 3(% of whom are women. Smallholder farmers practise pond-based production in upland locations. Farmers are loosely organised in farmer clubs.
There are two commercial operators: Maldeco uses cage farming, while Chambo Fisheries uses a bio-flow water recirculation production system. These systems require significant initial investment, which is out of reach of smallholders.
Investment for expansion, from commercial finanace, is hard to obtain, as a result of weak market information and concerns about the commercial viability of the sector. Instead, producers use their own savings.
Low production volumes make investor reluctant to consider aquaculture marketing, distribution or value-addition proposals. Smallholder scale producers produce about 1 metric tonne per hectare, against a potential of 6 tonnes per hectare.
Commercialisation is constrained by the quality and price of inputs, leaving huge unmet demand, both domestic and in neighbouring countries.
In 2020 there was no production of sex-reversed fingerling and floating fish food was imported. Manufacturers felt that small-scale producers, wouldn’t purchase these inputs. Floating feed imported from Zambia was subject to a levy from the Malawi government of 16.5% VAT on its landed value. Small-scale producers also lack technical knowledge and very few qualified government extension workers. This ultimately inhibits the profitability of the sector and holds back commercialisation.
In 2020, there was real map of where production was happening and no aggregation arrangements were in place. Small-scale farmers, alone or in their farmer groups, sold fish locally and prices are lower away from in urban markets. In rural areas prices are $2.7 compared to $4 in urban markets
Designing and pitching a viable business model for financing at this stage of the value chain requires credible information on current and projected supply chains to strengthen the value proposition. The National Fisheries and Aquaculture Policy (NFAP) identifies aquaculture as the second policy priority area and aspires to expand the sector to make up for dwindling fish catches. At the time the tax regime reduces local fish producers’ competitiveness due to the high cost of feed, while fish imports are duty-free.
In 2022 CASA was asked by FCDO to explore innovative, climate smart responses to the food security crisis. One of the technologies under review is a pilot programme to commercialise alternative sources of protein for use in poultry feed production. This is a pragmatic development to the 2020 sector strategy.