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									                             ALL ACP AGRICULTURAL COMMODITIES
                                        PROGRAMME

EUROPE AN CO MMISSION                                               ACP GROUP OF STATES




                            6 MONTHLY PROGRESS REPORT

                    FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2010

                           Eastern and Southern African Region



      FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS




                                    DATE: June 2010
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1              Introduction


In implementing its Contribution Agreement under the AAACP programme , FAO in
the period January 2010 to June 2010 has been focusing on four areas of services
provision, namely
      i.       Support to the process of sectoral value chain diagnosis and strategy
               formulation, and associated capacity building in policy analysis, design and
               implementation;
    ii.        Strengthening producer-market linkages and the institutional capacity of
               producer organisations;
    iii.       Sustainable increasing productivity, value addition and diversification in
               cotton-based commodity chains;
    iv.        National and regional level activities to identify and implement options for
               improved supply chain finance and risk management.

2              Project Activities and Status of Implementation

2.1            Result Area 1 – Development of effective commodity strategies and
               implementation plans

       2.1.1 Activity 1.ESA A01- Support to ITC process of chain
       diagnosis and strategy formulation

       Objective of the activity
           Assist stakeholder preparation to realization of in-depth diagnosis of
           commodity chain and livelihood systems in selected country/ commodity
           combinations, the formulation of appropriate commodity development
           strategies and its validation.

           Background
           In Zambia, FAO is supporting the ITC led strategy development process for the
           cassava sector through participation in stakeholder workshops, undertaking
           targeted studies and the development of recommendations in support of
           smallholder participation in the sector. FAO has supported the process since the
           initial consultation and briefing mission in April 2009, attending both stakeholder
           workshops and launch event, as well as commissioning studies to fill identified
           information gaps.
           Activities in Madagascar have been cancelled as a result of the unrest in early
           2009.

           Activities during the reporting period
              A value chain mapping and cost analysis was completed in April 2010 and
               submitted to the National Cassava Committee

              A survey and associated report was completed by Programme Against
               Malnutrition (PAM, Zambia) which investigated the determinants of
               smallholder participation in the process of cassava sector commercialisation.

           Outputs, results and main lessons:
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Paola Cadoni (2010) Value Chain Mapping and Cost Structure Analysis for
Cassava in Zambia. AAACP Paper Series – No. 14

Programme Against Malnutrition (2010) Smallholder Cassava Value Chain Asset
Survey. Lusaka, Zambia (draft report).

Next steps
A key concern raised during the process of strategy development was the ability
and willingness of smallholder households to supply what is essentially a food
security staple food into developing domestic and export markets.
To ensure that the strategy and implementation activities account for this, FAO,
with the support of the School of Oriental and African Studies (SOAS) will finalise
a series of recommendations (see Activity ESA.A03 below) on mechanisms
whereby smallholder market integration can be facilitated. The recommendations
will draw upon insights from the SOAS work (non-AAACP) in Zambia, as well as
on the outputs of Activities ESA.A03 and ESA.A08 below. The expectation is that
these will be used by the National Committee in designing appropriate
implementation activities.

FAO will also continue to contribute to and comment upon other components of
the strategy document and implementation plan as they are finalized during July
2010.

Activity 1.ESA.A02 - Policy advocacy in East and Southern
African grains markets

Objective of the activity
To build awareness and capacity relevant to cereal sector trade and
domestic policy interventions to:
  1. develop a better understanding of the use and impacts of trade
       policy interventions on cereal value chain stakeholders in East
       and Southern Africa;
  2. build the capacity of local institutions to understand the
       implications of trade policy use in specific market contexts; and
  3. strengthen national, regional and international public-private
       dialogue relating to the use of trade policy instruments.

   Background
   FAO is collaborating with the Eastern Africa Grains Council to improve the
   process of policy advocacy as it affects grain markets in the region. An initial
   set of activities was carried out under a letter of agreement with the EAGC,
   with the aim of developing an action plan for follow up activities in the region.
   The action plan was to be implemented with Tranche II funding. In the event
   FAO was not allocated additional funds for the grains sector under Tranche II.
   In order to ensure maximum impact with the remaining Tranche I funds, FAO
   is currently, through EAGC and ACTESA, partnering in a regional process of
   strengthening staple foods trade policy dialogue

   Activities in the reporting period
            A value chain analysis and trade policy base line for Zimbabwe was
             undertaken by BSERT, University of Pretoria in association with local
             consultants. The draft study, was used as the basis for a National
             Validation Workshop, held in Harare, Zimbabwe on 18th June 2010 and
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                facilitated by ACTESA and local consultants. Following its revision, the
                 study will contribute to a regional policy dialogue process supported by
                 USAID COMPETE and covering seven additional countries in the
                 region.
It was planned to complete a similar study in Southern Sudan, but this was not
possible for logistical reasons.
Outputs, results and main lessons:
BSERT, University of Pretoria (2010) The Grain Industry Value Chain in Zimbabwe.
Draft

Next steps
On the basis of inputs from the national consultation, the Zimbabwe study will be
finalised. This study along with seven similar country studies commissioned by
COMPETE, will form the basis of a regional workshop that will be organized in
collaboration with EAGC with assistance from ACTESA, COMPETE and FAO
(under the AAACP).

Activity 1.ESA.A03 - Assessment of alternative models of public-
private partnerships in support of VC development

   Objective of the activity
   To determine appropriate mechanisms for state intervention to
   leverage greater private sector investment and activity in key value
   chains

Background
Under a letter of Agreement with the School of Oriental and African Studies, a paper
has been commissioned assessing alternative mechanisms for leveraging private
sector involvement in support of poorly functioning value chains (see also
1.ESA.A01).

Activities in the reporting period
                A mission was undertaken in May 2010 by FAO and the School of
                 Oriental and African Studies (SOAS) with a view to developing
                 recommendations on how activities identified in the cassava sector
                 strategy can be implemented in a way that is inclusive of different
                 categories of smallholder producer household. This study will draw on
                 the insights from the study on assessing alternative mechanisms for
                 leveraging private sector involvement in the delivery of critical support
                 services.

Outputs, results and main lessons
See ESA.A01

Status: Closed

Spin Offs:

Contribution to the development of recommendations in support of the Zambia
Cassava Sector Strategy as detailed under ESA.A01
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2.2       Result Area 2 – Access to and use of markets, production factors and
          services

      2.2.2 East and Southern African Region

      Activity 1.ESA.A04 - Regional workshops                                 for     capacity
      strengthening of producer organisations

      Objective of the activity
      To strengthen the capacity of producer organizations to respond to
      trends in agricultural markets.

Background
                  A first regional workshop took place in December 2008 and was
                   reported earlier.   Outputs include a report on the workshop‟s
                   proceedings, of which a hard copy has been sent to all participants
                   and the CU.

Next steps
Follow-up sub-regional training workshops (Francophone and Anglophone) for
farmer organizations are planned to take place before December 2010.

      Activity 1.ESA.A05 - Support the development of inclusive
      business models for upstream actors

      Objective of the activity
      To identify buyers, agro-enterprises, or small businesses operating in
      cotton-maize in Uganda, Kenya, and Zambia.

Background
      This activity took place October – December 2009 and was reported on in the
      last progress report. Outputs include back to office reports which record the
      learning and results from this activity. As a result business model upgrading
      activities started in Kenya (see activity 6).
      As the second tranche proposal for cotton was not approved, funds for follow-up
      activities in the other countries were much more limited than anticipated. FAO
      thus undertook a mission to Zambia to identify partners and meaningful activities
      to be undertaken with the limited funds.
      Unlike Kenya, in Zambia there are no cotton cooperatives, but ginning
      companies operate outgrower schemes through which they contract individual
      farmers, and provide them with pre-financed input packages. However, the two
      historically dominant companies have reduced their input packages after the
      latest side-selling crisis in 2006 and the more recently established and smaller
      companies tend to pre-finance fewer inputs. Recent research found some
      evidence that companies were overcharging for the inputs. It was decided to
      focus activities on the identification of ways improve the current input distribution
      model, especially to increase price transparency for farmers. Terms of reference
      have been developed, see activity 6.
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Next steps
This activity has been closed and implementation continues under A06.

   Activity 1 - ESA.A06 Support the implementation of inclusive
   business models to improve farmer-buyer linkages for cotton-
   maize systems.

   Objective of the activity
   Improve farmer-buyer linkages for producers in Kenya and Zambia
   dependent on cotton-maize systems.

Background
Missions to the region in 2008-2009 identified target beneficiaries and service
providers in Kenya (Farm Concern International (FCI)) and Zambia (The Food
Security Research Project (FSRP)) to support with the implementation of this
activity.

In Kenya, two contracts have been signed with FCI, the first of which resulted in a
business model appraisal for three cooperatives in the Nyanza, Eastern and Coastal
provinces which described action plans for upgrading the models.
The second contract, signed in the last reporting period to assist cooperatives with
the implementation of the action plans includes capacity building in; agribusiness
management skills for cooperatives to improve market and advisory services
provided to members; production and harvesting practices for value addition;
diversification and business-to-business partnership strategies.

In Zambia, support to the sector is also on strengthening linkages between Cotton
Cooperatives and buyers, but with a focus on developing appropriate models to
improve the transparency and efficiency of the inputs systems between the two
parties. The draft terms of reference (TOR) for the first phase of activities in Zambia
was drafted in the last reporting period. The activity will include an (i) appraisal of the
current system of input packages and the costs charged to farmers by the main five
Cotton companies in the country, the results of which will be presented at a
stakeholder workshop to identify a revised system agreed on by all parties for pilot
testing.

As follow-up funding had not been allocated to the cotton sector for ESA on farme-
market linkages the remaining budget from Tranche I had to be consolidated to
ensure appropriate follow-up in Kenya and Zambia.

Activities in the reporting period
               Kenya ,draft training materials for assistance to Cotton Cooperatives in
                Kenya with the implementation of action plans were submitted to FAO
                by FCI between Dec 09-May 2010. The materials cover topics on
                organizational and contract negotiation skills, business and financial
                management, marketing, farm management logistics and quality
                control, and production.
                Substantial comments were provided by FAO on the training
                programme, which FCI is currently revising and will submit by mid-
                July. As a result the training has been held up and the contract will
                have a no cost extension until September 2010.
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               Zambia Discussions have taken place with The Food Security
                Research Project (FSRP) which has since been identified as the most
                appropriate service provider to carry out the work in Zambia.

               The service provider has been busy however in the past months
                finishing up other assignments. It is hoped that the contract will be
                signed with FSRP by the end of July 2010.

Next steps
- In Kenya training will continue under the present contract until September 2010,
after which it will be evaluated if there is still follow-up training necessary to ensure
sustainability of the activity.
- In Zambia a Letter of Agreement will be signed with FRSP in July 2010. The
assessment and stakeholder meeting should be completed by October for the
testing to begin during the next cotton season from November 2010 to June 2011.

Activity 1.ESA.A07 – Analytical support to UNCTAD in Commodity
exchanges (Analysis of obstacles to smallholder participation in
commodity exchanges)

   Objective of the activity
   Analyse constraints to greater participation of smallholders in national
   and sub-regional commodity exchanges for selected country/
   commodity combinations.

Background
This activity is contingent upon activities planned by UNCTAD.

Activities in the reporting period
      FAO is undertaking a review of the constraints to smallholder participation in
       commodity exchanges.

Outputs, results and main lessons
A draft has been developed

Next steps
Draft to be circulated to UNCTAD for comments. Finalisation during July 2010


Activity 1.ESA.A08 - Review of alternative models of smallholder
organizations

   Objective of the activity
   To determine appropriate organisational forms for smallholder
   organisations in support of the delivery of critical services in different
   value chains.

Background
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FAO has commissioned the School of Oriental and African Studies, to prepare a
review on existing organisation forms of smallholder farmers‟ organisation and their
contractual relations with other market actors. As with the assessment carried out
under Activity 1.ESA.A03, this review was prepared for use as a basis for developing
recommendations in support of implementation of the AAACP funded processes of
strategy development (See activity 1.ESA.A01).

Status: Completed

Follow-up/Spin-offs
Contribution to FAO workshop on “Policy Interventions and Institutional Innovations
in Support of Smallholder Market Participation”. Rome 3 – 4 June 2010

The insights from the report are currently being used to develop specific
recommendations for the Zambia cassava sector (see also 1.ESA.A01 and
1.ESA.A03).


Activity 1.ESA.A09 – Analytical support to UNCTAD on WRS (Support
to extended utilization of warehouse receipt systems).

   Objective of the activity
   To determine the feasibility of extension of Warehouse Receipt
   Systems.

Background
FAO has envisaged analytical support to UNCTAD‟s activities in promoting and
facilitating wider use of WRS. This has been provided through technical support in
the form of Workshop participation and document review.

The June 2009 workshop organised by the East Africa Grain Council with the
collaboration of FAO (see 1.ESA.A02) under the EU AAACP and the Swedish
International Development Agency, has also highlighted new aspects and avenues
of collaboration with other institutions such as Bourse Africa which are also working
in the area of risk management and access to finance with a regional perspective.
This regional consultative expert meeting developed a better understanding of the
use and impacts of policy interventions on cereal value chain stakeholders in East
and Southern Africa. One of the sessions was dedicated to market mechanisms and
saw the participation of UNCTAD among others. The workshop constituted also an
occasion to initiate new partnerships with regional actors and the complexities of the
issues have revamped discussions on the nature of future initiatives and avenues of
collaboration in the area of market based risk management mechanisms for cereals.

Status: Completed

Follow-up/Spin-offs
None

Activity 1.ESA.A10 - Support activities as per Kenya’s feasibility study
to revitalize Kenya’s cotton industry

This activity has been cancelled (merged into Activity 1.WST.A06 reported on above)
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Activity 1.ESA.A11 - Support establishment of a cassava commission
in Burundi, Rwanda and Uganda

This activity has been cancelled.

Activity 1.ESA.A12 - Facilitate market linkages between organic
cotton producers and the fashion industry (Tanzania, Kenya, Uganda)

Objective of the activity
In collaboration with UNCTAD, FAO will facilitate market linkages between
organic cotton producers and the fashion industry on the basis of existing
experiences and stakeholder inputs. Hereby greater awareness of organic
cotton as a diversification and as a value added crop will be created, with
the objective that this concludes in an increase of the market share of
organic cotton in the region.

Background
A desk study and analysis of the South East African cotton market (Uganda,
Tanzania and Kenya) with specific regard to the development of the organic cotton
sector and a mission to organic cotton initiatives revealed that soil fertility
management in organic cotton is one of the main technical constraints to develop
the sector.

Activities undertaken in the reporting period:
As per the Letter of Agreement which was signed in November with Istituto per la
Certificazione Etica e Ambientale (ICEA) -who also undertook the initial study in
relation to this activity- on the development and adoption of an Experimental
Learning Methodology to be implemented through a network of demonstration and
educational farms in rural villages in East Africa, the following activities have been
carried out:
     A proper Problem Diagnosis has been carried out with the active involvement
        of bioRe to gain a greater understanding of their agricultural and livelihood
        systems. Farmers will be supported in identifying the problems that are of
        most concern to them, in describing what actions they have taken in the past
        to minimize each problem, and in indicating which of the problems have the
        highest priority. (Report “WP2: Survey on farmers‟ socio-economic realities
        and felt needs”.
     A preliminary visit was carried out in January 2010 in order to understand the
        relevant categories and geographical characteristics of the area. Following
        that 24 interviews were conducted in the middle of Feb. 2010.
     Local farmers were identified to be part of the pilot programme (report WP1:
        Identification of the local farmers)
     A pilot training module for the Experiential Participatory Learning
        Methodology on soil fertility management has been prepared together with a
        Trainer‟s guide.
     The pilot project is being implemented.
     A backstopping mission to Meatu by FAO and ICEA was undertaken in June.

Outputs, results and lessons learned
A back to office report will be prepared on the backstopping mission. Progress
reports and two technical reports have been prepared by ICEA and cleared by FAO.
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From the mission, it was clear that there is great community and institutional support
on the local level.

Measures undertaken to ensure sustainability of the action
An experiential and participatory learning methodology has been adopted for
enhancing skills transfer and encouraging changes in farmers‟ behaviour. The
assumption is that we seldom learn from experience unless we assess the
experience, assigning our own meaning in terms of our own goals, aims, ambitions
and expectations. From these processes come the insights and the experience
takes on added meaning in relation to other experiences. The methodology will
include proper tools for its effective implementation.

Next steps
- Further training activities will be implemented.
- The training modules will be evaluated.

Activity 1.ESA.A13 - Regional seed systems review for cotton and
associated crops and planting materials for cassava

   Objective of the activity
   Seed review studies to identify key constraints for poor access to
   quality seed by smallholder farmers for cotton and associated crops as
   well as cassava planting materials. The studies will also identify
   success factors that characterise effective seed models in the region.
   The findings from the studies will form basis for developing action
   plans for interventions to improve seed delivery systems.

Background
FAO commissioned a study to review the seed systems for cotton, cassava and
crops grown in association for three countries in Southern Africa (Malawi,
Mozambique and Zambia) during September and October 2009. The findings of the
study were presented at a Regional GAP workshop (Activity 14) with a
recommendation to make a follow up review for the cotton seed sector in Zimbabwe.
The Zimbabwe study was conducted in December. The findings are provided in
Report entitled: FAO. 2009. Cotton and Cassava Seed Systems in Malawi,
Mozambique and Zambia, by V. Gwarazimba.

Activities in the reporting period
      A summary of the findings of the seed review report was included in a
       presentation made by FAO on „activities on seed related issues in SFS‟ at
       the workshop for the Harmonised Seed Security Project (HASSP) workshop
       held in South Africa on 20 to 21 May. The project is implemented by
       FARNPAN and supports Malawi, Swaziland, Zambia and Zimbabwe.

Outputs, results and lessons learned
The presentation of the findings from the study provided an opportunity for the four
countries to take into consideration the challenges for seed security in the SADC
region when developing their action plans for addressing seed security. The
participation by FAO in the workshop is an opportunity for providing capacity building
support for strengthening efforts to re-establish the Seed Security Network in the
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SADC region. The participation in the network is expected to eventually include all
the countries in the region.

Next steps
The activity is closed. However, the findings from the studies of the seed review will
be shared further with many other in the sub-region through the SADC seed network
as a way of contributing to the development of strategies for improving seed systems
in the countries in the sub-region.

Activity 1.ESA.A14 - Regional stakeholder workshop to review and
assess capacities for implementing GAP among smallholder farmers

   Objective of the activity
    Information exchange on lessons, innovative approaches and
    development of smallholder proposal to build capacity for increased
    use of Conservation Agriculture and other Good Agricultural Practices
    (GAP) concepts to contribute to more efficient sustainable production.

Background
FAO held a regional GAP workshop for representatives of cotton and cassava
producer organisations from four countries in the region (Malawi, Mozambique,
Zambia and Zimbabwe) in Lusaka Zambia in September 2009. Participants
developed action plans for their countries to address the needs for increased
implementation of GAP principles in cotton, cassava. The workshop recommended
that a study tour be conducted for Zimbabwe delegates on cotton and cassava
activities in Zambia.

Activities in the reporting period
      A study tour has been conducted in March 2010 for eight participants from
       Zimbabwe to visit the Cotton Research Trust and the cassava primary
       nursery in Zambia. The delegates included three representatives of the
       Zimbabwe Farmers Union, two farmers and government officers from the
       Ministry of Agriculture working on cotton and cassava.

Outputs, results and lessons learned
The delegation visited the Cotton Development Trust (CDT) a cotton production
research institution during the annual field day and was exposed to field
demonstrations on cotton that included cotton yield trials (CDT and Dunavant) that
covered GAPs in conservation agriculture an other improved agronomic practices
such as early planting as well as safe handling and storage of pesticides; trials on
plant densities and planting in basins (Conservation farming practice); a cotton-
maize-cowpea intercrop- food security demonstration; and a CFU-Conservation
Agriculture farm implements demonstration. Delegates also visited Arulussa farm; a
private establishment that produces clean cuttings of cassava planting materials for
sale to the government, NGOs and directly to farmers for further multiplication and
commercial production of cassava.

The lessons learnt from the tour are expected to be shared widely with other cotton
and cassava growers through the extension and training services of the Zimbabwe
Farmers Union and the cotton/cassava producer organisations as a way of
contributing to the implementation of GAP in cotton and cassava in Zimbabwe.
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Next steps
Due to lack of funding, no further activities have been undertaken, in spite of the fact
that opportunities were identified within implementation of the action plans for on-
going national projects for cassava and cotton, within AAACP activities on cassava
including interventions of the cotton-to-cloth COMESA strategy and the CACESA
initiative for cassava.
The activity is closed.


Activity 1.ESA.A15 - Capacity building on Good Agricultural Practices
based on Integrated Pest Management in horticulture

   Objective of the activity
   Promote income and market access of farmers and exporters in the
   horticulture industry in Uganda, by helping stakeholders understand
   and meet market requirements for Good Agricultural Practices.

Background
A national Strategy on capacity building for Good Agricultural Practices in Uganda,
which has been formulated by the National Steering Committee on Horticulture and
GAP (NSC) in 2008 with support from FAO. The action plan of the strategy identified
hot pepper and tomato as pilot sub-sectors. Farmer Field School activities have
been funded by the FAO-Multidonor Partnership Programme. It is foreseen that this
AAACP further contributes to the implementation of the strategy action plan.

Activities in the reporting period
      Activities are likely to take place at a regional level in the second part of 2010
       or in 2011, and are being identified with the Horticulture Council of Africa
       (regional association of exporters).

Activity 2.ESA.A03 : Enhancement of the commercialisation of the
cassava sector

   Objective of the activity
   Improving smallholder farmers‟ incomes and market linkages for
   cassava by supporting the agribusiness capacity of farmer groups to
   engage with industrial buyers and in cassava post-harvest value-added
   activities in rural communities.

Background
FAO implemented a two year project entitled “Enhancing Food Security in Cassava
Based Systems in Zambia and Malawi” (GTFS/RAF/394/ITA) funded by the Italian
government, from May 2007 to December 2009. The project strengthened the
management and organizational capacities of farmer groups and entrepreneurs,
developed skills in cassava production, value addition, marketing and farm business
management and attempted to link farmers to various cassava based value chains
(for fresh roots, dried chips, feed and flour). The project also sensitised policy makers
and the commercial agro-processing sector on the potential cassava offers for
economic growth. Building on that experience in Zambia, FAO has participated with
ITC in the process of supporting the development of a national cassava sector
strategy. Particular foci of FAO support relate to better understanding of the
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propensity of smallholders to generate marketable surpluses of cassava and the
determination of finance needs along the chain (see 1.ESA.A01).

The strategy shares many common objectives with the previous Italian funded project
and thus provides an opportunity to compliment and consolidate the achievements
already established. The activities under 2.ESA.A03 therefore focus predominantly
on (i) capacity building of farmer organizations in farm management and business
skills, quality management for processing and training in collective marketing,
logistics and contract negotiation, with visits and workshops organized to share
knowledge and good practices at both national and regional levels; (ii) finance needs
assessment as a basis for development of appropriate financial packages and (iii)
support to the formulation of policy interventions to facilitate cassava sector
commercialization.

Activities in the reporting period:
     In Zambia, new implementing partners were identified as the partners under
         the previous project had been unable to fulfill their commitments.
     LoAs were signed with Zambia Agribusiness Technical Assistance Centre (for
         business skills training), Advanced Metal Fabricators (for operation and
         maintenance of processing equipment).
     In Malawi, an LoA was signed with Total Land Care (for business skills
         training) and a contract was issued to an independent consultant to train
         entrepreneurs in the processing of high quality cassava flour.
     In Malawi, meetings were held with two of the key agro-industries (Universal
         Industries and Bakhresa Milling) that are interested in buying cassava chips
         and flour to facilitate linkages them and the cassava processors. I
     In Zambia, a contract is being developed with NATSAVE to undertake a
         finance needs assessment.

Outputs, results and main lessons

   An informal agreement was reached with Universal Industries to purchase
    cassava flour from the project‟s entrepreneurs for conducting a pilot trial.
   Tiger Feeds have purchased a trial consignment of cassava chips to use in the
    feed formulation.
   In Zambia, several key industries, including Tiger Feeds, have expressed interest
    in purchasing more produce from smallholders but are concerned about the
    reliability and volume of supply.

 Next steps
 A suitable partner still needs to be identified to provide training in the processing
   of high quality cassava flour.
 Trainings of farmers and entrepreneurs in both Malawi and Zambia will start by
   July 2010 in both countries.
 Dialogue and negotiation with a variety of agro-industries will continue to facilitate
   market linkages between industry and cassava processors.
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2.3       Result Area 3 – Market-based instruments to reduce producers’ income
          vulnerability

Activity 1.ESA.A16 - Supply chain risk and finance assessment

      Objective of the activity
      Activities in the area of supply chain risk and finance assessment are
      concentrated in two countries, Zambia and Malawi, and relate to the
      cassava industry. Given the nature of this crop and its resistance to
      adverse climatic events, analysis and implementation activities have
      been concentrated on supply chain finance and an analysis of
      constraints/risks that may affect linkages and investment in the
      cassava value chain.

Background
Following priority setting for AAACP activities, the analysis will be conducted in the
cassava sector in Zambia and in Malawi (under activity 2.ESA.A03). FAO has
conceived an integrated approach to revitalise the cassava sector by tackling all
different aspects from productivity, to institutional set up, supply chain finance and
risk management strategies and farmer/buyer linkages. The analysis will be based
on the administration of a questionnaire developed under the AAACP.

In Zambia, FAO established contacts with other IOs working in the area of risk
management and financial inclusion and in tandem with the ITC-led strategy
development process, sensitized cassava stakeholders to the subject.

In Malawi, FAO is working in close collaboration with its national office and
exchanging information with international organizations that are currently involved in
cassava value chain development such as the Gates Foundation.
Prior to undertaking work on supply chain finance and risk management for the
cassava value chain in Malawi, FAO is conducting an analysis to generate a better
understanding of the propensity of different categories of smallholder producers to
supply cassava to the market and the key determinants of their decisions. This
reflects a concern that, although it may have been demonstrated that that the
production of cassava products is very profitable, a comercialisation strategy is
unlikely to be successful if potential investors are not convinced that there will be a
reliable, competitively priced supply of raw material. This will result in a short paper
on the determinants of smallholder market participation and will be used to assist in
developing a survey which puts greater emphasis on the identification of real or
perceived risks along the chain.

Following a request by the Mozambique Cotton Institute a mission was undertaken
in April 2009 in order to confirm needs, among others, in the area of risk
management and access to finance for the cotton sector and to identify potential
partners in this area. The Mozambique Cotton Institute and FAO have agreed on
planned interventions that have been summarized in an Aide-memoire. The proposal
was not accepted for funding under the AAACP.
However, the CFC has proposed FAO to work in the area of risk management for
the cotton industry through its fast track facility. Even if activities undertaken by the
FAO are not formally part of the work under the AAACP, FAO is coordinating with
other International Organizations that are working on risk management for the cotton
sector under the AAACP such as the WB-ARMT.
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Activities in the reporting period
      The recent finalization of the ITC-led strategy development process and
       related establishment of the Cassava Stakeholder Committee in Zambia
       during early 2010 allowed FAO to initiate discussions on supply chain finance
       and risk management activities with partners identified during ITC-led
       workshops.

Outputs, results and main lessons
The terms of reference for “A survey on financial needs and constraints/risks that
affect cassava sector stakeholders‟ access to finance in Zambia” have been agreed
with the National Savings and Credit Bank (NATSAVE). The specific objective of the
survey is to determine the needs and the constraints that affect the cassava chain
stakeholders‟ access to finance. The current survey constitutes an essential starting
point to identify feasible value chain finance and risk management schemes to be
pilot tested with selected cassava sector stakeholders in Zambia.                  The
implementation of these schemes will build, and capitalize on, existing and potential
value chain linkages and will thus involve farmers, processors, buyers and financial
institutions who demonstrate interest in participating in the testing activities. The
identification of the most suitable financial schemes is also expected to contribute to
an increase in the number of bank savings‟ accounts in rural areas.

Next Steps
The survey in Zambia should be finalized no later than November 2010.
The survey in Malawi will be initiated by the end of 2010.
These activities will be funded with resources from 2.ESA.A01

Activity 1.ESA.A17 - Import and export risk management for cereals

   Objective of the activity
   Evaluation and promote the introduction of risk mitigating tools
   targeted to public and private sector actors, including small
   businesses.

Background
In light of the decision not to provide further funding for work on cereals under
Tranche 2, it was decided (as explained under 1.ESA.A02) to align activities A02,
A17 and A19 more closely with other donor funded activities currently being
coordinated by EAGC to ensure maximum returns to the AAACP work in this area.

In discussion with EAGC, and based on the action plan developed with EAGC under
activity A02 (see above), it was decided to develop a study at the regional level to
assess the feasibility of formal and informal price risk management mechanisms,
including improved policy interventions, working capital guarantees and export credit
insurance, in the cereal sectors of ESA.

Activities during the reporting period
FAO is developing the Terms of Reference for an assessment, the main objectives of
which will be the following:
      Identify the main features of risk exposure on the import and export side for
       the cereal sector in ESA selected countries
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      Document the use and assess the effectiveness of trade policy as an
       instrument for risk mitigation
      Assess the implications of introducing alternative market based risk
       management mechanisms in a scenario of restrictions on the use of
       discretionary trade policy interventions

Outputs, results and main lessons
None

Next steps
The assessment of cereal policies and their impact on cereal trade in the Eastern
and Southern Africa region will be drafted by December 2010 and will constitute one
of the background papers to be presented during the Regional consultations on
value chain risk management and finance (Activity 1.ESA.A019).


Activity 1.ESA.A18 - Review of Mombassa Tea Auction

   This activity has been cancelled.

Activity 1.ESA.A19 - Regional consultations on value chain risk
manage ment and finance

   Objective of the activity
   To discuss the possibility of introducing formal and informal risk
   transfer mechanisms along the value chain capable of enhancing
   credit collateralization and facilitate access of chain actors to finance.

Background
The KOW and subsequent consultations indicated that credit availability is limited,
among other reasons, due to the presence of high risks that reduce the investment
incentives facing individual stakeholders. The sources of such risk vary widely, but
include inappropriate policy interventions, extensive market failure as well as climatic
events. Based on outputs developed under Activities A02, A16, and A17, and from
existing cases and literature from other regions, a regional workshop will be held
with a view to identifying solutions ranging from those that account for the linkage
between insurance and credit products to those involving improved policy and
regulatory environments. The activity will focus on the cereal sector

Activities during the reporting period
Review of ongoing initiatives in the area of risk management and supply chain
finance for cereal in the Eastern and Southern Africa region in order to further define
participants and objectives of the workshop planned in 2011

Outputs, results and main lessons
None

Next steps
Implementation of workshop planned in 2011
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2.4       Result Area 4 – Complementarities and synergies between IOs, EU and
          ACP actors

Inter-agency collaboration
-     FAO has provided continued and close assistance to the ITC development
      process in Samoa, Fiji, Grenada, Jamaica, Madagascar, Zambia, and Cameroon
      and for the Regional Cotton Strategies. More specifically for the reporting period,
      FAO continued to participate in the strategy development process for cassava in
      Zambia, coffee in Cameroon, cassava in Guyana and Fruit and Vegetables in
      Samoa.
-     FAO‟s participation at IAM meetings, the latest in September 2009 have provided
      excellent opportunities to exchange information with partner IO‟s on ongoing
      activities and find synergies and collaboration in specific countries/regions and
      sub-sectors
-     EU Africa Partnership on cotton, with COS Cotton member countries.
-     Collaboration with UNCTAD, for the Caribbean in St Lucia.
-     Collaboration with the UNDP within the framework of their PFIP (Pacific Financial
      Inclusion project) and with UNCTAD.
-     In follow-up to its joint mission in Cameroon in October 2008, FAO and the
      World Bank have had follow-up meetings to discuss convergent areas of work
      and to exchange outputs on work to-date in East and West Africa.

Participation to consultative meetings at regional/national level
-     Participation at the ITC national consultative meetings: fruit and vegetable sector
      in Samoa and cassava in Zambia. These meetings together with individual
      meetings held with the sector stakeholders contributed in providing inputs for
      identification of priorities in the area of finance and risk management and to
      provide insights from FAO into the strategy development process.
-     FAO also participated in a workshop organised by UNCTAD in Zambia
      (1.ESA.A07).
-     FAO organized a regional workshop in Senegal (see activity 1.WST.A01) and in
      Lusaka (see activity (1.ESA.A14).
-     To provide inputs for results 1 and 2, with a particular focus on the integration of
      producer organizations into modern value chains, FAO has, using its field
      networks, carried out extensive consultations with local chain stakeholders in
      Samoa, St Vincent, Jamaica, Burkina Faso, Senegal, Sierra Leone, Cameroon
      and Mozambique and Zambia.

Collaboration with Regional organisations
-     In follow-up to the AAACP twinning decisions, FAO has consulted with ROPPA
      and SPC to develop the activity fiches for the regional focal points. To implement
      the fiches, a Letter of Agreement has already been negotiated with SPC.
-     FAO has also commented on the proposed twinning agreement between ITC
      and COMESA.

Next steps:
The negotiations for the Letter of Agreement with ROPPA are already far advanced
and both contracts will be signed before the end of January, after which activities
can start.
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    Collaboration with National and farmers’ organisations
    -  In Kenya in R2 activities related to producer organizations strengthening in
       support the cotton section will be implemented in collaboration with the regional
       NGO, Farm Concern International.
    - In Zambia, activities will be implemented in collaboration with the Cotton
       Association of Zambia (CAZ). For the regional farm organisation workshop in
       South Africa in December 2008 and the GAP workshop in Lusaka in September
       2009 FAO has collaborated with SACAU.
    Discussion on modalities of future collaboration is still ongoing for;
    - Zambia/cassava: collaboration in the area of value chain finance with IFAD and
       national financial institutions such as Zambian development Bank, NATSAVE
       and Madison Insurance Company. Under tranche 2 collaboration with TLC and
       IITA in Malawi is foreseen and a suitable partner for Zambia is being sought.
    - ESA region/cereal, cassava and cotton: collaboration with Bourse Africa and
       UNCTAD.


    Horticulture Uganda
    Main partners include :
    - National Steering Committee on Horticulture and GAP. Horticulture Promotion
       Organization of Uganda (HPOU, exporters apex). Hortexa (exporters
       organisation). Ministry of Agriculture (MAAIF). Uganda National Bureau of
       Standards (UNBS). Uganda Export Promotion Board (UEPB). the FAO national
       IPPM Programme.


3   Information and communication
    The respective country EC offices are informed when FAO carries out activities under
    the AAACP. The CU is kept continually up-to-date on activities taking place in the
    ACP regions, and FAO shares the outputs from these activities via the CU‟s web site.
    FAO also uses the FAO regional network to share information resulting from AAACP
    activities.

    FAO developed an AAACP project web site on inclusive value chains which has
    been translated into French and Spanish and was launched in June 2010.

    FAO also developed an AAACP paper series to publish the studies executed in the
    course of the AAACP project.


4   Programme administration and finance
    4.1 Programme management
    Programme management in this period was dominated by the finalization of activities
    under Result 1 and implementation of field activities under Result 2 and 3.
    Activities are carried out in close cooperation with the FAO Sub-regional and country
    offices. Responsibility lies with officers assigned to particular ACP regions and/or
    results of the AAACP. Operational aspects will be overseen by the AAACP Project
    manager.
    HQ staff directly involved in implementation includes: Federica Angelucci, Heiko
    Bammann, Caterina Batello, Emily Carroll, Aziz Elbehri, Maaike Loogman, Eva
    Moller, Jamie Morrison, Maria Pagura, Anne-Sophie Poisot, Florence Tartanac,
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William Settle. Other HQ staff will be involved on the basis of specific requirements
and availability.
The main contact point for FAO is Siobhan Kelly as AAACP Project manager.

								
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