New guidelines for the Operations of the Common Fund for Commodities for the period 2013-2015 were approved by the Governing Bodies in 2012 which mandated the Secretariat of the CFC to invite proposals for funding for commodity development through an open call for proposals. Second call for proposals was initiated in February 2013 and the proposals meeting the criteria specified were reviewed by the Consultative Committee (CC) of the CFC. The Executive Board of the CFC in its meeting held in October 2013 approved ten proposals ranging from sustainable coffee production, outgrower flower cultivation, spices and herbs, dairy and cheese to partnership in Africa Agriculture SME Fund on the recommendations of the Consultative Committee. Brief summary of the proposals approved is given below.
(i) Improvement of production of Paprika in Burkina Faso and Niger for processing and export: Overall cost USD 4.410 mln; CFC – Grant USD 250,000
The project aims to develop paprika production and processing. The target products are Spice Grade Paprika Powder (SGPP) and Oleoresin of Paprika (ORP). Both are important value added products derived from paprika. The main products developed are obtained via the processing of dried paprika flakes into SGPP and/or ORP. In view of the need for further securing of commercial/counterpart funding, a conditional grant of USD 250,000 as seed money was approved.
(ii) Sustainable and Secure Smallholder Systems at Scale (4S@Scale): Overall cost USD 8,620,168 mln; CFC- USD 1,500,000 of which USD 1 mln is being requested from the OPEC Fund for International Development; Grant USD 75,000
The activities foreseen in the program are based on earlier analysis of perceived bottlenecks for smallholder coffee production. These obstacles have been categorized as the need to increase the volume of production in order to make the sector viable, to increase the overall profitability of the individual smallholder farm as a business unit, and the continuing dependency of small holders on external support services. These obstacles have been addressed and a solution model has been developed and implemented on relatively modest scale in the project countries (with an emphasis on Kenya). The program is now considered to be sufficiently developed to be expanded in the three countries (having led to productivity increases from 1 to 3.5kg per tree and a nearly tripling of the quantities of coffee graded as premium grade, with an overall outcome of 70% producer income increases after three years). The Fund was requested to contribute to the funding of the extended program with a loan of US$1.5 mln. The loan will be primarily used in the support for the further rolling out of biogas digester program targeting the provision of 16,000 (family-scale) units in Kenya, and 3,000 each in Tanzania and Uganda. Dairy and horticulture intercropping are two important other components of the overall program.
(iii) Promotion Project for Standardized Flowers Cultivation in Chongqing Flowers World in China: Overall cost USD 3.43 mln; CFC – equity USD 1 mln of which USD 500,000 is being requested from the OPEC Fund for International Development; Grant USD 50,000
Chongqing is a metropolitan city in China with a population of about 33 mln and two digit economic growth rate. The demand for ornamental horticulture products such as flowers and trees is booming. The project will build up cultivation demonstration base, expand flower nurseries, promote adoption of appropriate technologies in the flower sector, and establish sales network locally, domestically and internationally. The CFC will contribute USD 1 mln, and the partner will contribute USD 2.43 mln to set up a cooperative joint venture according to Chinese law.
(iv) The taste of Nepal – Community production and processing of Nepalese spices & herbs: Overall cost USD 763.000; CFC – loan USD 363.000 of which USD 250,000 is being requested from the OPEC Fund for International Development; Grant USD 18,150
A modern, environmental friendly, processing facility for the production of certified organic herbs and spices meeting international market standards will be set up near Kathmandu. The new equipment will produce ready to ship organic Nepalese herbs and spices for export to the world market. The fresh herbs will be washed, cleaned, dried and then processed into slices, powder or any other required form. Main products will be organic ginger powder and slices, organic turmeric, organic cardamom and organic cinnamon. Organic certification will be obtained both for the facility and for the land of the participating farmers. The facility will be certified by Ecocert on organic standards. ISO certification will be obtained for food safety standards. Nepalese farmers, once the facility is operating, will be able to arrange long term supply contracts and have stable incomes. The new facility will create jobs for 48 local employees, while about 400 Nepalese farmers, organised in cooperatives, will receive trainings on organic farming, organisational development, financial management and farmers cooperatives. The loan will be used to finance investments in processing equipment at the start of the project.
(v) Dairy/cheese factory in Santander: Overall cost USD 730,365; CFC – loan USD 355.000 of which USD 250,000 is being requested from the OPEC Fund for International Development; Grant USD 17,750
Under the CFC project, VIVALAC Dairy Enterprise will purchase processing equipment to enhance quality standards and hygienic practices and extend its product range from double cream cheese and curd to the processing of quality dairy products like pasteurized cheese, pear cheese, cottage cheese and butter to be sold in the local and regional markets. Project implementation will enable increasing production yields, reducing waste in dairy processing and recycling of raw materials. The main target market has been identified in the neighboring provinces, where VIVALAC expects to sell its quality dairy products to families, fast foods, cafes, schools, restaurants and other medium-size intermediaries. The loan will be used to finance investments in processing equipment at the start of the project to enhance the scale, efficiency and stabilize the quality of cheese production.
(vi) Agroman extension into Sugar Production: Overall cost USD 723,166; CFC – loan USD 350,000; Grant USD 17,500
The project under consideration involves the production of sugar for the local market, substituting some imports. The target for sales is small and large local wholesalers, shop keepers and department stores. The proposal is forthcoming from a private entrepreneur based in Madagascar, with an operational history in the field of spice production. The company was established in the year 2000 and is reporting stable incomes and profits. The company is now intending to expand its operations into sugarcane production, partly through self production and partly through contracting small holders in the neighborhood of the cane processing plant to be set up. Total acreage envisaged by the company is about 100 ha’s (75 centrally managed and 25 from smallholders). Total incremental employment for production and processing would be in the range of 30 – 40 people.
The proponents envisaged a financing need for investments of just above US$ 650,000 for acquisition and land preparation and for the procurement and installation of required cane processing equipment and machinery.
(vii) Blue Nile Glove Factory in Bahirdar, Ethiopia: Overall cost USD 1 mln; CFC – loan USD 300,000 of which USD 200,000 is being requested from the OPEC Fund for International Development; Grant USD 15,000
The proponent owns an existing and operating tannery since 2000, producing different types of crust and semi-finished and finished leather. Based on initial in-house trial production and small scale marketing efforts, the commercial potential of expansion into value-added leather products was established, particularly in the field of production of different types of leather gloves. A new company has been established (Blue Nile Glove Factory Plc) which will focus on the production and export/marketing of three main types of gloves, targeting the “dressing gloves”, “sports gloves” and “military gloves”. A new building is being constructed to house the factory and initial production is targeting around 360,000 pairs of gloves after one year of operations, to be produced by around 100 employees (this employment figure is expected to increase to an estimated 200 by the end of year 3). The market is envisaged to be found in Europe and North America, initially on the basis of existing contacts but increasingly through internet sales.
The CFC funds will be used to facilitate the financing of the start-up of the factory, including meeting costs of first year working capital (covering inter alia in-house training programmes for newly recruited staff).
(viii) Partnership with the EcoEnterprises II Fund (EcoE II): Overall cost USD 27 mln; CFC contribution USD 500,000; Grant USD 25,000
EcoE II seeks to invest mezzanine capital in small companies with a proven business model at expansion stage which are active in the sustainable agriculture and forestry (products) sector. The targeted investee companies supply into a continuously growing market for organic food products and certified wood predominantly in the US (through main stream retail channels such as Walmart/Home Depot and similar dominant food retailers and home improvement stores).
The existing investment pipeline is an outcome of the most successful (predecessor) EcoE I Fund investments in start-up enterprises and informal businesses since the year 2000, which have in the meantime graduated into companies with a proven business model that are ready to expand. EcoE II anticipates investments in 12 to 15 individual companies. The CFC funds will be used to scale up investment activities.
(ix) Partnership with the Africa Agriculture SME Fund: Overall cost USD 30 mln; CFC contribution USD 2 mln; Grant USD 100,000
The aim of AAF-SME is to support private sector companies that implement strategies to enhance and diversify food production and distribution in Africa by providing equity or quasi equity funding and strengthening their management. Priority investments will be in food production and distribution in cereals, livestock farming, dairy, fruit and vegetables, crop protection, logistics, fertilizers, seeds, edible oils, smallholders and agri-services. At least one quarter of AAF-SME capital will be invested in primary agriculture. AAF-SME will be complemented through a Technical Assistance Facility (TAF) that provides grant funding for complementary projects to strengthen the developmental aspects of individual investments with an emphasis on the establishment of outgrower schemes.
AAF-SME provides finance to enterprises active in the primary, secondary and tertiary sector along agricultural value chains in Africa on the scale of 0.15 million to 4 mln USD. The current total fund volume of AAF stands at USD 30 mln available for investments with a final target of USD 80 mln during a second (and final) closure. The fund is set up to invest in 30 to 40 individual investments. The TAF is funded by the European Union with USD 10 mln.
AAF-SME is an independently managed sub-fund of the larger African Agriculture Fund (AAF-with a target investment size between 5 and 30 mln USD). AAF and AAF-SME have been established on a joint initiative of the Agence Française de Dévéloppement (AFD), PROPARCO, the Spanish Government (AECID), African Development Bank (AfDB), Alliance for a Green Revolution in Africa (AGRA), International Fund for Agricultural Development (IFAD), Banque Ouest Africaine de Dévéloppement (BOAD), Development Bank of Southern Africa (DBSA) and ECOWAS Bank for Investment. AAF SME is managed by Databank Agrifund Manager Ltd. (DAFML) and has contracted an independent Environmental and Social Coordinator (Environmental Business Strategies (Pty) Ltd). The TAF is managed by the NGO Technoserve.
The CFC funds will be used to scale up investment activities.
(x) Partnership with the Moringa Agroforestry Fund: Overall cost USD 50 mln; CFC contribution up to USD 1.5 mln; Grant USD 75,000
Moringa seeks to invest in African and Latin American agroforestry projects that are able to commercially compete with deforestation drivers (like cattle ranching, crop farming and timber harvesting) while generating a clear positive impact on local populations and the environment. Investee companies will generate diversified revenue streams (i.e. revenues from local and/or export markets, including forestry products, agricultural products and carbon credits). Moringa investments will be complemented through a Technical Assistance Facility (TAF) that will provide grant funding for projects to strengthen the developmental aspects of individual investments.
Moringa will invest in manageable scale agroforestry projects (usually 3-15,000 ha/project) which usually have a industrial nucleus (being the investee company of Moringa) and a wider circle of integrated smallholder farms/value chain partners in its vicinity. The current total fund volume of Moringa stands at EUR 50 mln available for investments with a final target volume of EUR 100 mln during a second closure. The fund seeks to invest in 12 to 15 individual investments.
Moringa has been established by the Investment Bank Compagnie Benjamin de Rothschild (CBR) in collaboration with the commercial branch of the French National Forestry Service (OFNI). To date, main investors are the Spanish Government (FONPRODE), the Dutch Development Financial Institution FMO, Finnfund, the Development Bank of Latin America (CAF) and Proparco. This is complemented by smaller private sector investors. OFNI acts as Technical Advisor to Moringa. The CFC funds will be used to scale up investment activities.