BP4GG Learning Brief 7- Diversifying income streams is an effective resilience strategy

Business Partnerships for Global Goals COVID-19 Vulnerable Supply Chain Facility Business Partnerships as a Force for Good Learning Series

Business Partnerships as a Force for Good Diversifying income streams is an effective resilience strategy for African farms and farmers Learning Brief No. 7

By Karen Smith, Agriculture Lead, Business Partnerships for Global Goals (BP4GG) programme Business Partnerships for Global Goals is a UK Aid funded programme implemented by Mott MacDonald, with support from Accenture Development Partnerships and IIED. We partner with UK and international retail brands, not-for-profit organisations, farms, and factories to provide economic, social, environmental, and health benefits to around 1 million vulnerable women and men impacted by COVID-19 in 7 countries across Africa and Asia.

Learning presented at BP4GG agriculture sector learning event on 8th July 2021. Attended by the following Vulnerable Supply Chain Facility partners • • • • • • • • • •

Co-op Emerging Leaders Fairtrade Fairtrade Africa FLOCERT Imani Development MM Flowers Mondelēz Union Roasted Xpol

Diversification to manage risk Eighteen months after the COVID-19 pandemic began, it is clear it will be years before the disruptions caused in global supply chains will subside. For African suppliers and farmers the pandemic has upset access to inputs, logistics and labour and caused increases to their cost of living. It has created unpredictable changes in markets as importers and retailers respond to lockdowns, changes in consumption and logistical crises. Maintaining operations and continuing to find ways to weather uncertainties have always been critical for African agribusinesses to survive and for farmers to provide for their households, but the pandemic has brought unprecedented challenges.

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One approach to managing shocks in the external environment is to diversify business activities to reduce reliance on a single revenue stream. This can be achieved by expanding through new product lines or services – either offered to existing markets and customers or to new ones. This broadening can work well to de-risk an enterprise – if one crop fails or a market shuts down, there will be other options to maintain revenues. Two of the COVID-19 Vulnerable Supply Chain¹ (VSCF) projects chose to use this approach as part of their overall strategies.

“Having a wider range of production methods, skills and knowhow existing within a business makes it easier to reorient into new activities or sectors (to ‘transform’) as a response when shocks/stresses arise.”

(Martin, Neil, Building Resilience Through Greater Adaptability to Long-Term Challenges (Paris: OECD, 2016) 8)

Mott MacDonald | BP4GG | Business Partnerships as a Force for Good Learning Series | Learning Brief No. 7.

Practical examples of diversification in the VSCF Agriculture portfolio We have examples of how diversification was deployed for different beneficiary groups in the VSCF – ranging from individual farmers to co-operatives, workers and farms – which are described below. All followed the same approach: • Identify the need and the opportunity for diversification.

• Research the best diversification options with the buy-in and collaboration of farmers, workers and farms.

• Provide technical assistance and seed funding to undertake new activities.

Cocoa farmers in Ghana The VSCF-funded Cadbury Farmer Resilience Fund², which built on an existing partnership between Mondelēz International and Fairtrade under the Climate Change and Organisational Strengthening Programme, has supported nearly 22,500 farmers in nine co-operative unions to respond to risks arising from both climate change and COVID-19. The project used a grants mechanism to deliver funds to unions, proportionate to their membership and adjusted for female participation. These grants were to implement both crop and non-crop income generating activities (IGAs) enabling farms to respond to the many factors driving vulnerabilities in the cocoa sector, as described in Figure 1 below.

Fairtrade and consultants Imani Development worked closely with the unions to explain the principles of the grants and discuss the optimum IGAs that would serve their needs. With this support, the unions focused on finding food crops that suited local conditions, some of which could also be used as cash crops. They also built on previous Mondelēz International Cocoa Life projects where possible and ensured that there were synergies with ongoing cocoa production (such as beekeeping to assist with cocoa pollination). The unions also prioritised activities which were suited to women and young farmers.

Factor

Objective

Seasonality of incomes

Income smoothing

Transitory events (e.g. drought)

Risk mitigation / seeking gross income

Chronic lack of income in current farming model

Transistion into new income streams

Susceptibility to price shocks & high volatiltiy in income

Long term income smoothing / de-risking

Food insecurity due to reduced yields & rising prices

Risk mitigation

Lack of / poor agricultural credit markets means non-farm activity is financing mechanism for farm

Cross-investment and income smoothing

Inadequate resources to offer optimal support services to union members

Seeking gross income

Figure 1: Assessment of factors driving vulnerability and the strategic objectives of diversification (Imani Development)

The unions each selected between two and six different IGAs to trial, primarily crops but also cassava processing, breadmaking, soapmaking, poultry, fish farming and beekeeping.

Although there were some delays, all 38 IGAs were implemented successfully within five months. Some were managed at the union level, with benefits then being distributed across all members, some were implemented by co-operatives and some were delegated to individual farmers who would then keep a portion of the crops before sharing the rest. A common thread across all IGAs was climate resilience, for example in selecting drought resistant crops and using intercropping to provide shade.

The VSCF-funded IGAs are already helping the nine unions to sustain food security and new income streams for their cocoa farmers and to replicate and scale where possible. Some replication is already happening organically, for example with farmers in Amansie West copying the yam production initiated by the grants.

¹ The VSCF is a rapid COVID-19 response fund set up by the UK Foreign, Commonwealth and Development Office and managed by Mott MacDonald Ltd. The facility has partnered with 16 UK retailers supporting over 100 suppliers across Bangladesh, Ethiopia, Ghana, Kenya, Myanmar, Tanzania, and Zimbabwe to provide economic, social, and health benefits to around 1 million women and men direct and indirectly. ² The Cadbury Farmer Resilience Fund is a VSCF project co-funded by Mondelēz International and managed by Fairtrade. It aims to protect cocoa production and farmer livelihoods for nine cocoa unions in Ghana during the COVID-19 pandemic, as well as supporting climate smart income diversification, through initiatives such as a grant facility, training and pilots, and community climate adaptation action plans.

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Kenyan flower farm workers Despite recovery in demand since the initial shock of the pandemic, the Kenyan flower industry has had to make major adjustments to its operations to meet health and safety needs in the face of ongoing surges in COVID-19 cases. Workers have been affected by reduced hours, losses of income (themselves or by other household members) and by increases in the cost of living. The VSCF Fairtrade and MM Flower’s project Resilience in Flower Supply Chains³ tackled both the immediate needs of Kenyan workers as well as resilience interventions and policylevel research and recommendations for the sector. As a part of the resilience strategy, four farms were asked to nominate their most vulnerable workers to receive training and support to set up an IGA. Starting a business while holding down a full-time job is a challenging ask at the best of times, so the project hired Emerging Leaders who specialise in helping individuals to catalyse change in their lives. Four ‘Leadership for Life’ trainings were conducted for 171 staff at Longonot, Star, K-Gorge, and Fleur Africa farms in April-May 2021.

Forty of the participants were subsequently chosen to receive a small grant of £100 GBP as seed funding for their business idea.

The Emerging Leaders training was delivered in three modules. Steve Miles, the company’s CEO, explains that the first module on leadership focuses on mindset and behaviour change and helps individuals identify what the interferences are – external and internal – that stop them from achieving their potential and how too change them. Subsequent modules provide financial tools and then facilitate the development of practical action plans to implement IGAs.

Figure 2: Additional income generated by IGAs (Emerging Leaders survey, June 2021)

Within a month of the training, all those provided with seed funding had commenced businesses as well as 45% of those who had just received training. The most popular IGAs chosen were animal farming, crop and clothing sales.

As illustrated in Figure 2, 64% of IGAs reported generating income by the end of the first month, with a further 17% also generating income by the end of the second month. In addition to these striking results, Emerging Leaders found that a proportion of those trained had gone on to share the principles and topics of the training with nearly 1,200 more people who may also go on to start IGAs. A further amplification of impact is anticipated as the new businesses are also likely to employ additional workers. A full report on the immediate results from the IGA work and case studies can be found on the Emerging Leaders website.

³ The Resilience in Flower Supply Chains project is led by Fairtrade and MM Flowers, partnered with the Co-op, Coventry University, Food Network for Ethical Trade (FNET), Marks & Spencer, Partner Africa, Tesco, and Women Working Worldwide. It sought to reach over 6,000 direct beneficiaries through the provision of health packages, kitchen gardens, gender training, income generation support, and farm diversification and up to 150,000 indirect beneficiaries through a COVID-19 communication campaign. Its expected long-term outcome is that flower farm workers will be protected, and the flower industry will be fairer and more resilient.

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Kenyan flower farms The pandemic exposed the reliance of Kenyan flower farms on their export markets and one of the workstreams in the Resilience in Flower Supply Chains project sought to assist four farms in finding alternatives to their core business to protect against future shocks. In discussion with the farms, the ideas selected were beekeeping, briquette making, ‘packed at source’ flowers and summer flower breeding. The first two are further from core business but use existing resources for new purposes. The latter two offer the farms strategic opportunities in value addition and in cost reduction respectively.

At the time of writing, the beehives are installed and staff have been trained in beekeeping, the flowers have been planted for packed at source and breeding initiatives and the briquette making plans are being finalised. The full impact of initiatives will be seen after the end of the grant period, but it is expected they will offer further opportunities for workers as well as improved job security through the increased resilience of the farms to market shocks.

What factors have led to the success of diversification activities?

Building capacity and providing encouragement to take on something new Implementing change requires internal resources – whether it is time, investment or both. The VSCF projects needed to be cognisant not to increase the pressure on farmers, workers and businesses who were already inundated in responding to existing and new challenges. Farms were having to find novel ways of working to reduce COVID-19 infection risk, workers were managing on reduced salaries and farmers were struggling to access inputs. So what enabled these individuals and businesses to take on new IGAs? “Before the training, I was always afraid of taking the first step in all that I do. I always felt dissatisfied with my current situation of earning a living but thanks to Emerging Leaders Leadership for Life training, I was able to overcome my fears and am now running a profitable fish business.”

(Beneficiary from Longonot farm, Emerging Leaders survey) Caroline Downey, MM Flowers, credits “a range of project partners that encouraged the four flower farms to ‘think outside of their box of roses’ in taking on new activities”. For the Ghanaian cocoa unions, the capacity building in financial and project management funded by VSCF was vital to provide them with the increased abilities needed to manage their grants and IGAs. The flower worker testimonials from the Emerging Leaders training show that a key factor for success was the leadership training that enabled the workers to believe in their own potential. Without the external support from the VSCF, those lacking in confidence as well as business skills would have been less likely to take on new initiatives.

Drawing on relevant expertise Fairtrade Africa’s Patrick Adewojah found that the high diversification of cocoa union IGAs was significantly influenced by the process of engaging the unions in a co-creation exercise. Fairtrade would have recommended fewer IGAs to avoid overwhelming the unions. However, the 38 IGAs that the nine unions chose to set up were all successfully implemented; the unions ran some directly and delegated others to member co-operatives or individual farmers.

Fairtrade and MM Flowers brought their own extensive experience in helping support flower farm workers’ choice of IGAs as well as commissioning an analysis of the optimal business options. The workers then used their own local knowledge of gaps in markets, coupled with their own skillsets and interests, to make their final IGA selections.

The farm-level diversification ideas were more complex than the individual IGAs. VSCF funding was used for technical research studies that provided vital information to inform design decisions. One study found that while the idea to use rose waste for briquette making was appealing, the farm in question (Longonot) could not generate enough waste on its own to set up a viable business. Research also suggested that the Kenyan briquette market was saturated. External expertise helped the farm to avoid investing in the wrong project and a revised diversification approach is being developed.

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Leveraging synergies and existing resources The closer to existing production an IGA is for farms or farmers, the easier it will be to implement. Furthermore, the best choices of IGA can leverage existing resources and knowledge and even achieve a symbiotic impact.

A great example of this is beekeeping: despite some cultural reservations about bees, Fleur Africa chose to trial 20 hives, knowing that there is a strong demand for honey in Kenya as well as options to sell royal jelly and beeswax.

Similarly, beekeeping was chosen by Fanteakwa Union as honey is in high demand and cocoa flowers can benefit from pollination where production is organic (no pesticides). The unions took advantage of other synergies with cocoa production including the use of cocoa husks to make soap and the use of manure from livestock projects as fertiliser for cocoa and other crops.

Preparation to enter new markets

Figure 3: Fanteakwa ‘Fancu’ brand soap products

Businesses also need to be confident that they have the knowledge and access to enter new markets when diversifying. The crop IGAs set up by the Ghanaian cocoa unions were mostly designed for food or for local markets. However, some of the non-crop ventures required additional support to enable products to be marketed effectively. For example, marketing soap requires investment in packaging, branding and decisions on pricing and where best to sell. Support on this was provided to the five unions on top of the technical training and an example of the branding for Fanteakwa Union’s ‘Fancu’ soap can be seen in Figure 3.

Conclusions and anticipated impact Diversification is a tried and tested strategy to spread business risk and the three examples discussed from VSCF agriculture projects demonstrate that with the right support sustainable new income streams can be achieved using this strategy: • Businesses, workers and farmers can independently choose to test new revenue opportunities, but the VSCF projects “The diversification into other flowers funding enabled them to access broader support services and gives us the opportunity to explore gain new skills and insights that otherwise would have been other markets for bouquets away from hard to find, particularly under the pressure of the COVID-19 roses both nationally and internationally pandemic. reducing our risk and increasing our • Grant funding was critical to enable the Ghanaian cocoa opportunities.” unions to test new ideas but taking on a new project may not (K-Gorge farm management) always require external funds, as the uptake of IGAs among the flower farm workers who only received training shows.

The training and technical support delivered by the projects was universally valuable in opening up possibilities and creating stronger potential for all three diversification initiatives.

• Furthermore, the farms, farmers and workers supported by the VSCF to develop IGAs all contributed match funds or labour of their own towards the projects, demonstrating their engagement and commitment to sustaining the new income streams.

The chance to try new activities has also led to opportunities to improve environmental and gender equality, disability and social inclusion (GEDSI) outcomes, for example: • Climate resilience is a primary focus for the cocoa project in Ghana (and was a key consideration in crop variety and farming choices for the IGAs).

• The cocoa union grants design explicitly encouraged the involvement of youth and women and this is illustrated by the proportion of female farmers engaged in IGAs such as soapmaking and breadmaking (45% women).

Also, 47% of those provided with new/cheaper food sources from the grant projects were women.

• For the flower farm IGAs, the four farms chose their most vulnerable workers, 71% of whom were women and 20% people living with disabilities.

• The flower farm diversification was weighted towards work that suited women, such as the summer flower breeding and ‘packed at source’ flowers.

Some of the IGAs may also eventually spur much bigger endeavours. In Ghana, for example, one of the unions has independently been working on a large diversification project to launch a new $1.5M factory to manufacture soap from farmers’ cocoa husks. This demonstrates what can be possible with ambition and strong management.

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The IGAs developed under the VSCF in Kenya and Ghana are only a few months old, but there is good evidence that the three sets of diversification activities will eventually lead to sustainable and significant impact. The Kenya farm diversification work is at a very early stage, but all the farms have reported their commitment and enthusiasm for the projects. Star farm management, for example, intend to develop their breeding project: “The training that the staff have received will enable them to successfully breed new varieties. It is our intention to scale up the planting to increase the stock of summer flowers and to explore different markets for our products.”

The flower farm worker IGAs have got off to a flying start; as illustrated in Figure 2, the average IGA revenues reported by Kenyan flower workers were already 2/3 of their salaries within two months of starting, and 86% of the workers surveyed by Emerging Leaders expected to keep their IGAs going for at least five years. Beyond the direct impact on these workers and their families, the benefits are expected to multiply through replication among contacts as well as employment by the new businesses.

In Ghana, Fairtrade predict that over 12,500 cocoa farmers (43% women) will have additional income or new cheaper food sources by September 2021, and of these 5,400 will be as a result of new employment. By March 2022, these results are expected to rise to 15,500 farmers with impacts being seen on around 90,000 farmers and their dependents. Both the crop and non-crop IGAs can be scaled within the unions and will continue to receive support from Mondelēz and Fairtrade through ongoing programmes.

Amansie West Union committee members with yam Photo credit: Karen Smith, BP4GG

“The programme has given over 85% of our members additional livelihood income, employment, and relieved the burden of depending on only cocoa production.”

(Fanteakwa Union Committee)

Business Partnerships as a Force for Good Learning Series VSCF Vision “To enable vulnerable people and supply chains to recover from and remain resilient to the economic and social impacts of COVID-19, by leveraging the reach and influence of responsible businesses through partnerships.”

Bangladesh

VSCF Mission

Ghana

Ethiopia Kenya

“To enable recovery and resilience from the COVID-19 pandemic by forming strategic partnerships with global businesses. Working within supply chains in Africa and Asia, we will test and scale approaches to provide additional health and safety support, increase incomes, safeguard jobs, and ensure continuing access to markets.

We will support vulnerable people within supply chains to recover from COVID-19, and support responsible businesses to build on these experiences to become more sustainable.”

Tanzania

Zimbabwe

VSCF countries

6

Myanmar