Four years ago, AgDevCo took a pioneering risk by investing half a million dollars in a newly formed smallholder farmer co-operative, called the Phata Co-operative, in southern Malawi. The co-op was formed to grow sugarcane and staple food crops under irrigation. The project benefited from an infrastructure grant from the EU and support from local farm management company Agricane, who initiated the project working with local farmers.
The investment has now fully repaid AgDevCo, providing a positive net financial return after costs, and delivering over $2.8m of cash benefits to the Phata Co-op members to date as rental payments, dividends and surplus cash reserves. The co-op continues to go from strength to strength and is now doubling in size, with a second phase investment from AgDevCo of $1.6 million.
Farmers in Malawi’s Shire Valley live in an area of low and erratic rainfall. Households typically grow crops like maize and cotton, achieving low yields and earning cash incomes of below $200 per year. When the rains fail, or there is flooding, farmers can lose almost their entire production. The past three years have been particularly challenging.
With a reliable income from sugarcane sales to a local factory owned by British group Illovo, and access to irrigation to grow maize and beans, the 436 members of the Phata Co-op farmers were able to increase their incomes, despite drought and floods. Members have used dividends to open small businesses in the area. The co-op repaid AgDevCo’s loan two years early and has started investing in seed production and aquaculture.
Throughout AgDevCo has played an active role on the board of the co-op, ensuring high standard of corporate governance and contributing strategic, financial and agronomic advice. A key role was helping to negotiate the terms of the management contract with Agricane and long-term sales agreement with Illovo.
Alice, one of the workers employed by the co-op said “In the past, if I was lucky, I would get seasonal work but even that depended on the rain. Crops are now grown on irrigated land and there is work year round. I have a steady income, which goes a long way to support my extended family”.
Phata demonstrates what can be achieved when aid – AgDevCo receives the majority of its funding from UK Aid – is invested in productive SME agriculture businesses to drive higher productivity and incomes of farmers using modern irrigation.
Jim Henderson, AgDevCo’s country director in Malawi, said:
“Phata is a scalable and replicable model for creating jobs and tackling food insecurity, at a time when rainfall is increasingly unpredictable. Investing in agriculture is a highly efficient way of deploying aid since it allows communities to move beyond reliance on handouts and earns a financial return which can be recycled”.