In Malawi, the dependence on rain-fed agriculture restricts productivity to a single growing season. Unpredictable rainfall, caused by shifting climate patterns, leads to inconsistent crop yields and produce quality. Compounded by minimal options for post-harvest storage due to low rural electrification rates, around 30% of produce is lost. This makes it difficult for many to achieve sustainable livelihoods from farming, particularly for women who face additional challenges in accessing land, finances, technologies and markets.
In 2021, Practical Action Consulting partnered with African Mini Grids and Modern Farming Technologies to pilot an innovative farming business model in northern Malawi, supported by funding from PREO. This model aimed to target each step of the agricultural value chain to address these issues. The approach involved supporting women farmers to boost their crop yield by employing greenhouses and solar drip irrigation. Additionally, a solar-powered cooling facility was set up to reduce post-harvest losses. The project also focused on establishing new market connections with various wholesale buyers, enabling women farmers to sell their produce at improved prices while reducing risks and dependency on a single buyer.
As the project came to a close in June 2023, PREO interviewed John Chettleborough, the Agriculture and Markets Lead at Practical Action Consulting, to hear the valuable insights he gained from the project.
Q: What was your intended project goal and what specific objectives did you initially set out to accomplish?
The project area, in northern Malawi, is characterised by a combination of factors that make agricultural livelihoods, the only significant source of income in the area, extremely difficult.
- Agriculture predominantly depends on rainfall, allowing for only one harvest per year. This limitation poses significant challenges to sustaining productivity.
- The unpredictability of both rainfall patterns and temperature has been exacerbated by the impacts of climate change. Consequently, productivity challenges have intensified.
- Additionally, post-harvest losses ranging from 30% to 50% exacerbate these challenges.
- Beyond its implications for food security, this situation also hinders market access for farmers, due to the inability to consistently supply produce.
- The situation is worse for women within the community, who face challenges in accessing land, finance, and technology.
This project sought to test an ‘end to end’ business model that would secure market demand and work backwards to support solar powered irrigated horticulture by women farmers, preserve produce in a refrigerated chill plant and satisfy the market demand. It was a partnership between Practical Action Consulting (PAC) and a local Malawian social enterprise, Modern Farming Technologies (MFT), with MFT managing operations and PAC providing market, gender, and learning support.
Over a two-year period, the project set out to achieve two primary objectives: 1) enable 135 women to became commercial horticulture farmers, growing tomatoes in greenhouses irrigated by solar pumps; 2) generate enough learning to ascertain the viability of the model as a business.
Q: Could you describe your business model and highlight its distinguishing features compared to other approaches?
The business model is characterised by several key features –
- Firstly, it operates as a ‘one-stop shop’ through Modern Farming Technologies (MFT), delivering an end-to-end solution, providing farmers with access to technology (solar pumps, greenhouses), extension services, inputs and access to markets, thus overcoming a range of challenges experienced by small farmers.
- Secondly, it employs a contract farming and ‘rent to own’ model, helping women farmers gain access to productive assets. Women farmers sell all Grade 1 produce to MFT, with rent to own payments deducted at source.
- Thirdly, the model integrates an insulated solar powered refrigerated container, to preserve produce and attract buyers.
- Additionally, it stands out for its diversified range of final produce buyers, which enhances resilience.
- Lastly, the model allows the repaid grant finance from the ‘rent to own’ scheme to be reinvested in the inclusion of more women farmers into the project and the expansion of additional greenhouse construction.
What sets it apart from other business models is its context suitability and relevance. In this part of northern Malawi, where markets are not very developed, the presence of a singular enterprise that can provide a one stop shop to address multiple constraints, is strategically vital. In other situations, where there are many more market actors present, it may be possible to adopt a model that uses different businesses to support different functions and address different constraints.
But in both cases, there is a mutual inter-dependence between improving agricultural productivity, accessing markets, and paying for productive assets. All these challenges need to be addressed at the same time.
The ‘rent to own’ scheme, set up by MFT with grant finance, is a unique feature of this business model. Under this scheme, loans to purchase a share of solar water pump, storage tank, drip kit and greenhouses are provided to women farmer groups, who repay the loan over an expected 4-year period with 0% interest cost. This can be a simple and effective way to enable women farmers to overcome financial access problems, especially when grant or working capital is available. It can also help women build up a credit history, demonstrating to financial institutions the viability of investing in women farmers, which would ultimately provide a more sustainable solution for accessing assets such as solar pumps.
Q: Could the model be transformative for women and entrepreneurs in the vegetable sector in Malawi?
The insights garnered from the project offer valuable lessons for the development of similar models, but it is important to note that direct replication in the exact same format as the past two years might not be feasible. For instance, on a positive note, the model does demonstrate that a combination of a one stop shop and contract farming can be used to secure access to productive assets, support productivity and enable market access.
Moreover, the model shows that with production and marketing support, women farmers can generate sufficient revenue to pay for energy and agricultural assets and still take a reasonable income home. Indications are that loans can be repaid in about 4 years, assuming productivity is maintained.
Although not employed within this project, it appears that commercial financing could viably be employed to fund pumps and greenhouses for women farmers under these conditions.
However, the model didn’t validate the commercial feasibility of investing in a cold storage plant of the scale employed (a 40-foot shipping container). Interestingly, the development of a consistent supply of high-quality produce had the effect of attracting buyers into the area. Traders are now visiting almost daily, which reduces the need for extensive storage capacity. A smaller, cheaper container would have sufficed, perhaps with the option to expand in the future, when necessary.
For the model to work well, the issue of side-selling – a common challenge with contract farming – must be addressed. As the project advanced, this issue began to emerge as a concern, potentially posing a challenge for specific entrepreneurs. The underlying issue in this instance stems from the fact that MFT has been paying a fixed price for tomatoes, in alignment with fixed-price long-term contracts with buyers. However, the price in the open market fluctuates and when it rises above the MFT fixed price, side selling can arise. To tackle this issue two approaches are recommended:
- Firstly, ensuring that participating farmers possess an entrepreneurial mindset and understand the long-term benefits of technical support and consistent payments, as opposed to a lack of technical support and the uncertainty associated with the fluctuating pricing trends of the open market.
- Secondly, devising a pricing structure that can accommodate some adjustment in response to the price fluctuations of the open market.
Q: Can you describe some of the challenges faced during the project and how PAC & MFT adapted to them?
Throughout the project, we encountered several challenges, which can be summarised as follows.
- Environmental challenges: The excessive heat experienced in the area led to significant crop damage. To address this, MFT staff sought technical solutions by studying greenhouse farming practices employed by other organisations. This research prompted a redesign of greenhouses, incorporating additional shade netting.
- Productivity challenges: The project introduced farming practices that differed from local agriculture, requiring focused efforts to maintain consistent quantity and quality, including crop hygiene within greenhouses. This has taken time to develop and has been more successful with some farmers than with others. As a result, progress has been iterative, and it has taken longer than expected for productivity to increase. The lesson learned from this is that developing a more commercial mindset takes time. It is not achieved by one-off trainings but requires ongoing support for an extended period. The provision of this support has always been part of the MFT plan, but its value was reinforced by this experience. This also highlights the significance of strategic participant selection to ensure those engaged possess the potential for mindset and capacity development.
- Marketing challenges: Initially, a contract was secured with ShopRite, a leading supermarket chain. However, as the project progressed, ShopRite took the decision to cease operations in Malawi due to macro-economic conditions. At the same time, the anticipation of tourist lodges around Lake Malawi playing a significant role as customers was met with a challenging reality: the recovery of the sector post-COVID has been slow. In contrast, informal buyers seemed to increase in number. Although the loss of the formal buyers was disappointing, the project had adopted a diverse and adaptable marketing strategy and so it was able to pivot and replace formal buyers with informal buyers when this opportunity became apparent.
- Side-selling: Despite being on an upward trajectory in December 2022, sales to MFT have declined since due to side-selling. This is the period of the year when tomato prices are at their highest and traders visit tomato farms almost daily.
Q: The journey began by supporting women entrepreneurs through two greenhouses, yet by project completion, over 135 greenhouse owners had emerged, reaching out to MFT to sell their products. What factors can account for this remarkable success?
The achieved numbers align with the project’s original targets. However, the success of the project needs to be seen in more than just the number of greenhouses and the number of women selling produce. The Impact Evaluation revealed some insightful information.
Although the project’s primary focus was commercial tomato production, its ripple effects extended to various dimensions of women’s livelihoods. For instance, 71% of women farmers acknowledged increased food security and 49% went on to adopt modern farming techniques on their other farms.
The project’s impacts were also seen at household level, evidenced by 36% of women reporting increased capacity to manage family healthcare costs, 21% experiencing improved ability to cover school fees, and a 10% rise in women farmers saving from their earnings.
There was also a positive influence on gender roles and confidence outside of the household. Over 50% of the women highlighted social benefits as the most significant impact of the project, including improved decision-making and entrepreneurial skills and heightened confidence in engaging in community activities.
The success of the project can be attributed to a range of factors:
- Greenhouse farming is appealing to women farmers due to its efficiency, requiring less time compared to traditional methods. For time-poor women, this is an important benefit.
- The rent to own scheme coupled with the provision of extension services by MFT has effectively eliminated barriers relating to access to finance, technology, and training for women farmers. It has enabled them to start commercial farming at no upfront cost, which helps explain the increase in participant number. But it should also be recognised that the lack of any selection process for farmers may have contributed to the side-selling challenge.
- The fact that women are working together, in a cooperative, has helped the development of social capital which explains some of the positive gender related outcomes. Additionally, MFT’s endeavour to sensitise men as part of the initiative, fostering an enabling domestic environment, has also contributed to this progress.
- The market demand for a consistent supply of high-quality produce and the region’s challenges in meeting this demand, explains why it has been possible to so successfully market the tomatoes produced.
Q: What lessons can other companies and the wider sector take from this project? Which unexpected lesson surprised you the most?
The significance of the informal market: It had been assumed that the main markets needed to sustain the business were formal markets. However, a combination of political issues and the COVID pandemic have demonstrated how vulnerable those markets can be. Informal traders have shown themselves to be a much bigger market than expected and one that is more resilient to these sorts of shocks. Similar initiatives should consider gathering market intelligence on the informal as well as the formal markets available.
Assumptions about refrigeration have been challenged: High rates of crop wastage often lead, as in this project, to assumptions being made about the need for some sort of storage solution. However, the experience of this project so far has illustrated that the development of consistent and high-quality produce can be so attractive to buyers that they procure it regularity, reducing the pressing need for extensive storage space. In this project a smaller refrigeration unit would have sufficed. As with most issues, this is context specific, but it does highlight the need for more detailed market research. It also suggests that an iterative approach – in which refrigeration capacity is gradually built up as need becomes apparent – is a strategy that might be worthy of consideration. This may create a case for more modular chilling unit designs.
The importance of a self-selection process: The project was designed to accommodate anyone who wished to participate. However, as evidenced, this open approach carries the risk of attracting individuals lacking the necessary entrepreneurial spirit and agricultural commitment. Implementing a ‘self-selection’ process, wherein certain participation barriers are introduced (such as a minor upfront financial commitment), could prove effective in ensuring that those who engage are genuinely entrepreneurial and deeply committed to making it work.
Q: Looking ahead, what are your plans for achieving scale-up?
PAC will leverage these insights to inform the design of other productive use energy initiatives in collaboration with the private sector, including those that utilise small grants to catalyse new business models. We are currently scoping the potential of similar work in East and Southern Africa.
As forMFT, there has been considerable, and very rapid growth in the number of greenhouses supported by the company. This has presented challenges in terms of retaining enough control to ensure that the model works well. The recent side-selling issues during the PREO project are an illustration of that challenge. However, MFT believes in the model, and is working through the issues to make it work better for everyone. In response to demand from customers for a wider range of high-quality produce, MFT is now developing well managed, irrigated farming in open fields. The aim is to get the same consistent quality and consistent supply of produce as is being achieved through the greenhouse farming, and for all the produce to flow through the chill stores as aggregation and sales outlets.
