Setting the baseline for a new cassava supply chain in Malawi
When will the project reach break-even, how many smallholders will directly benefit, what additional income can they expect and what are the potential impacts on the food production and packaging industry in Malawi and the Southern Africa region?
These were just some of the issues discussed last week between the BIF team and Universal Industries, when setting the baseline for a new BIF project in Malawi.
Universal Industries Ltd., the largest manufacturer for biscuits, snacks and confectionary in Malawi, aims to set up an inclusive business model for the production of High Quality Cassava Flour (HQCF) by sourcing fresh cassava root from local smallholders and commercial farms. See the full summary for this project.
What is cassava?
Cassava is a drought resistant staple crop and usually grown by poor farmers as a secondary food crop, often as a boundary marker. For those people and their families, cassava is vital for both food security and income generation. Cassava flour is made from dry cassava roots and can be used as a partial substitute for wheat flour within the food production industry (e.g. in biscuits or bread) and as a replacement for starch as adhesive within the paperboard/ packaging industry.
What is High Quality Cassava Flour?
For the production of High Quality Cassava Flour (HQCF), the fresh cassava roots have to be peeled, grated and turned into wet mash within approx. 48 hours of harvesting the roots. Compared to ‘conventional’ cassava flour, the higher quality product results into better commercial opportunities, e.g. cassava flour used as starch substitute in the packaging industry is strong enough to produce ‘sticky notes’, whereas HQCF is suitable for the production of a much stronger adhesive, e.g. to produce robust paperboard.
What is the commercial opportunity for Universal Industries?
Universal has already been using dried cassava roots for the production of cassava flour for the past 10 years for use in their biscuits. Now, the company wants to move into the production of HQCF to realise the commercial opportunities that have been identified and proven successful in other countries, such as Nigeria, which is the world’s largest producer of cassava.
Malawi relies heavily on wheat imports. According to Comtrad Malawi imported over $81 million of wheat in 2010, a 23% rise since 2009. Wheat prices are currently high and likely to increase further. For Universal as well as other businesses in the food and packaging industry in Malawi and the wider Southern African region this implies they rely on expensive flour and starch products. HQCF offers the opportunity for cost reduction through import substitution.
Whilst cassava is grown, HQCF is not currently produced in Malawi. For Universal this offers the opportunity to realise a first mover advantage by setting up a new supply chain based on a two-pronged approach: direct sourcing from local smallholder farmers as well as procurement from commercial farms.
How will smallholders benefit?
Production facilities are planned to be up and running by mid 2012, with the aim to produce over 450 MT of HQCF involving 2,600 smallholder farmers in the first year.
7,000 farmers in the region are already growing cassava. 700 smallholders have already been indentified and have set up relationships with Universal. Others will be targeted according to their proximity to the planned processing facility (approx. 30 min drive from Blantyre in the Chiradzulu District) and their existing level of organisation. Farmers will receive agronomy and business training on behalf of Universal. A long term objective will be to facilitate value addition by smallholders through the processing of cassava wet cake, an intermediate product produced in the processing of HQCF.
Read more about how BIF is supporting Universal Industries in the project summary. Find out more about other projects supported by BIF in Malawi in the Malawi Project Update November 2011.