1

THE UNITED REPULIC OF TANZANIA

PRIME MINISTER’S OFFICE

MARKETING INFRASTRUCTURE, VALUE ADDITION AND RURAL FINANCE

SUPPORT PROGRAMME (MIVARF)

HANDENI DISTRICT COUNCIL

CONTRACT FOR THE PROVISION OF SERVICES IN STRENGTHENING OF

PRODUCER GROUPS, PROCESSORS AND MARKETING ASSOCIATIONS

CONTRACT NO. LGA/131/2015/2016/01

EMPLOYER: PMO-MIVARF

P.O BOX 14416, ARUSHA

AND

HANDENI DISTRICT COUNCIL

P.O BOX 355, HANDENI

BUSINESS CASES
Prepared by

Hermengild Mtenga

Geodata Consultants Ltd

October, 2017
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TABLE OF CONTENTS

PAGE
ITEM NO.
Business Cases for Guiding Establishment of Management and
Operational Systems for Kwachaga Warehouse , Kifaru and Mauya
AMCOS in Handeni District 6
1.0 Introduction 6
.0 MIVARF Project 6
2.1 Key Constraints Established During Baseline Survey; February,
2016
7
2.2 MIVARF Achievements 2016-2017
8
3.0 Business cases justification
9
4.0 Business Case for Kwachaga Warehouse
10
4.1 Viability situation 10
4.1.1 Kwachaga warehouse
Support formation of Warehouse Receipt Operations at Kwachaga
Warehouse with key actors being individual producers Producer
groups, Farmer Organization, Nduguti Hills (Warehouse Operator),
Agro Input Suppliers, Financial Institutions and Off-Takers
10
4.1.2 Individual maize producers 12
4.1.3 Actors Roles 13
5.0 Business case for Kifaru AMCOS

Strengthening Market Linkages Capacities of Kifaru AMCOS to

Coordinate Services Provision through Off-takers, Agro-dealers and
Financial Institutions
14
5.1 Kifaru AMCOS 14
5.1.1 Viability situation 14
5.1.2 Actors Roles 16
6.0 Business case for Mauya AMCOS 17

Strengthening Market Linkages Capacities of Mauya AMCOS to

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Coordinate Services Provision through Off-takers, Agro-dealers and

Financial Institutions

6.1 Mauya AMCOS 17

6.1.1 Viability situation 17
6.1.2 Actors Roles 19
7.0 Benefits
20
8.0 Tasks of the Service Provider 20
8.1 Kwachaga Warehouse 20
8.2 Mauya and Kifaru AMCOS 22
9.0 Proposed work 23
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List of Tables
Tables Page No.
TABLE 1: MIVARF WORKING COVERAGE 7
TABLE 2: Parameters 10
TABLE 3: Income and Profitability: Kwachaga Income and Profits 11
TABLE 4: Cash Flow Projections 11
TABLE 5: Kifaru Amcos Income and Profit 15
TABLE 6: Kifaru Producer Viability Parameters 15
TABLE 7: Kifaru Cash Flow Projections 17
TABLE 8: Mauya Profitability Projections 18
TABLE 9: Mauya Producer Viability Parameters 18
TABLE 10 Mauya Cash Flows 19
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Handeni District Council- Mivarf Program

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Business Cases for Guiding Establishment of Management and Operational

Systems for Kwachaga Warehouse , Kifaru and Mauya AMCOS in Handeni
District

1.0 Introduction
Handeni district which is part of the eight districts in Tanga region is among of the most
rural dominated economy in Tanzania. The district covers an area of 7,080 km 2 in the
southwestern part of the Region. The District is administratively divided into 6 divisions,
21 wards and there are 91 registered villages with 775 hamlets. The districts is
occupied by 355,702 people while annual growth rate is 3.3%, and on average
population density is 50 people per square kilometer (NPC 2012).

The district economy and livelihoods are based on natural resources. The main sectors
of the district economy include crop cultivation, animal husbandry, forestry, wildlife,
beekeeping, mining and trade. Agriculture is the leading livelihoods sustaining activity
whereby it employs about 95% of the population. Generally, considering the quality of
livelihoods in Handeni can be described as very weak, because the average cash
income per person is only Tshs.210,000/-, way below the regional average of Tshs.
743,000/- and the national average of Tshs. 765,331.

Total area of the districts is 708,000 hectares while arable land is 636,453 hectares of
which under crop cultivation is only 30%. Dominant agricultural crops include maize as
staple food and cash crop, beans, cowpeas, cassava, millet, cotton, sunflower, pigeon
peas, oranges, mangoes, coconuts, bananas, and vegetables. Most of the agriculture
is rain fed.

The district is also the most rapidly populating district in Tanga Region with various
investors in different sectors. Since the majority of the population is living in abject
poverty, the district authorities aims at alleviating poverty and improving, as rapidly as
possible, the quality of life of the people. The task is to promote and facilitate
investment that will harness the rich and diverse natural resources found in the district
to bring about rapid and sustainable economic growth and social progress.

2.0 MIVARF Project

Handeni District Council through MIVARF is developing maize value chain subsector
through implementation of producer empowerment and market linkage. Associated to
the capacity building (PEML) is the infrastructure improvement. The implementation of
program started on January, 2016 and expected to end on 31 st December,2017. The
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Project is working 7 wards with 19 villages. The interventions cover the whole
segments of the maize value chain that ranges from production to marketing. The main
beneficiaries are 1050 farmers of which 43% are women organized in 38 groups.

Table 1: MIVARF Working Coverage

Ward Villages Groups Female Male Total
1. Kabuku 2 2 13 44 57
2. Kabuku Ndani 5 5 107 187 294
3. Kwachaga 3 4 38 50 87
4. Kwaluguru 2 8 120 122 242
5. Kwamatuku 2 7 56 86 142
6. Kwankonje 2 5 71 49 120
7.Ndolwa 3 6 48 59 107
Total 19 38 453 597 1050
Percentage 43 57 100
Source: Brent (SP) reports

2.1 Key Constraints Established During Baseline Survey; February, 2016

 Low productivity (500kgs- five bags/acre) emanating from dismal use of

agricultural inputs- use of local seed varieties, non use of fertilizers.

 Weak and unregistered smallholder producer groups and marketing associations

 Weather is uncertain as all maize growing in the district dependence on rains

which had been un-reliable.

 High post harvest losses in terms of quality and quantity.

 Maize grain was of low quality due to soiling, trash, sand, low skills in sorting,
storage skills that led to microbial contaminations.
 Informal unorganized maize markets and marketing and the use of
unconventional weight measures such as tins instead of calibrated weighing
scales

 Poor feeder roads

 Inadequate storage facilities

 Lack of rural financial facilities to cater for SHPGs and the marketing
associations’ financial requirements.
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2.2 MIVARF Achievements 2016-2017

 38 groups (smallholder maize producers, marketing associations-Amcos ) have

been registered and strengthened

 Ten agro dealers including HDC (Shayo, Mabewa Agrovet, Amos Agrovet,
Yosuka General Supplies, Caspian General Supplies Ltd, Nogra Enterprises Co
Ltd, and Christopher Agro vet Supply, Chacha Agro Vet, Meru have been linked
with smallholder groups whereby a total of 36.2tons of improved maize seed had
been sold and planted to 5,000 acres for the 2016/17 season that produced
10,000 Tons of maize.

 Modern warehouse with an estimated storage capacity of 1,000 tons constructed

at Kwachaga village which in now receiving maize from farmers under the
flexible warehouse receipt system.

 29.5km feeder road network constructed in the maize production areas

(Kwachaga- Kitungu 15km road, Kwankunga- Makungoi 6km road, and Junction
–Nkale Misufini 8km road)..

 Three business plans/bankable business proposals have been developed for the
Mauya AMACOS, Kifaru Amcos and Kwachaga warehouse.

 30 action plans for 30 groups had been developed.

 As a result of good weather and the increased use of improved maize seeds,
10,000 Tons have been realized from the 38 groups during the 2016/17 season
compared to only 200 Tons in the previous season of 2015/16.

 Maize yields have increased from 80kgs in 2015/16 to 2,000kgs per acre in the
2016/17 season.

 Maize cost of production per kg had been reduced from Tshs2,88/- in 2015/16 to
Tshs135/- in the 2016/17 season.

 Average Gross Margin in 2016/17 increased to Tshs730,000/- from negative

159,500/ in 2015/16 per acre

 SHPGs at Mauya warehouse and Kifaru AMCOS have collectively stored and
marketed 210MT
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 Two saccos (Mauya and Kifaru) are being strengthened and the Sindeni
SACCOS is being revised and that SHPGs and Marketing Associations will be
sensitized to join the SACCOS

 Three Vikobas are among the groups that had been offering financial services to
the SHPGs and it is recommended that every group to establish vikoba..

 17 out of 38 groups are linked with financial institutions through establishment of

bank accounts

3.0 Business cases justification

Currently the interventions of MIVARF have been undergoing implementation through
the Components of Infrastructure Improvement and Producer Empowerment and
Market Linkages. Total of Tshs 1.851 billion (roads construction Tshs 1.228 billion,
Kwachaga warehouse Tshs 453 million and PEML Tshs 170 million) have been spent
that have resulted into the achievements realized and narrated. The roads, the
warehouse and the capacity building interventions have created economic and
business impacts in the maize sub-sector.

The impacts include, 10,000MT worth Tshs 5.00 billion were produced, feeder roads
are passable and have reduced transportation costs and increased movements by
locals and buyers, while cost of production has been reduced to Tshs 135,000/kg
compare to Tshs 288,000/kg. Other emerging impacts include through growth in gross
margin to Tshs 730,000/acre from Tshs 159,500 and the Kwachaga warehouse is
providing services under semi-formal WRS while the Kifaru AMCOS has collected and
traded 210MT worth Tshs 105.00 Million. On accessibility of services needed along the
value chain several agro-dealers have supplied inputs (seeds, fertilizer and pesticides)
and buyers of maize have started trading through the Kwachaga and Kifaru AMCOS
warehouse.
The warehouses are expected to create more robust buying and selling platforms to
enhance supply and pricing for maize crop in the area. The warehouses will also
provide an opportunity for farmers to access appropriate storage facilities, supply of
inputs, viable marketing outlets where farmers will not be forced to sell maize at low
farm gate prices and accessibility to market information. The warehouse will basically
link the private sector with smallholder farmers via trade arrangement and thus
enabling formal trading arrangements.
Currently the challenge is the inexistence of a business and marketing arrangements
that will link and enable the farmers, buyers, agro-dealers and financial services
providers to work together and all benefit from the maize sub-sector. Therefore, the
business cases are meant for enabling the Kwachaga warehouse, Mauya and Kifaru
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AMCOS to establish commercially viable services that are based on consortium model.
The arrangements will entail participation of SHPGs, warehouse operators, agro input
suppliers, financial institutions, and off-takers. Thus the focus is to establish viable
management and operational system for the warehouse at Kwachaga, and
development of the capacities of Mauya and Kifaru AMCOS to operate as hubs for
providing maize products markets, provision of inputs and other services through
linkages with off-takers, agro-dealers and financial institutions.
4.0 Business Case for Kwachaga Warehouse
Support formation of Warehouse Receipt Operations at Kwachaga Warehouse
with key actors being individual producers Producer groups, Farmer
Organization, Nduguti Hills (Warehouse Operator), Agro Input Suppliers,
Financial Institutions and Off-Takers

4.1 Viability situation

The viability assessments provides the key operational and financial parameters that
justifies investing in supporting the establishment of the management and operational
structures including capacity building for enabling to operate and create the expected
benefits. It covers the level of farmers and hence key parameters at farm gate and at
the level of the warehouse at Kwachaga.

4.1.1 Kwachaga warehouse

The available business plan for the warehouse shows that in the initial year (assuming
2017/18), the operations will need a total of Tshs 1.524 billion while the sales will be
Tshs 1.240 billion and the deficit will be 284.00 million. In the next year onwards the net
income will be Tshs 241.45 million and onwards it will continue to make profits not less
than the amount indicated in year two. The storage capacity of the warehouse is
1000MT but to reach those levels, the warehouse would need to offload not less than
2,000MT of maize each season. That means the offloading rate will need to be quick to
clear space for the extra 1000MT. Producers for the maize will be from Kwachaga and
Kwankoje wards and be not less than 670 each farming 1.5 acres and produce
minimum of 2000kgs/acre. The production is expected to grow up to 3,216MT.

Table 2 provides the parameters that were used to project income and net profit from
the operations.

Table 2: Parameters
Parameter Yr 1 Yr 2 Yr 3 Yr4 Yr5
Farmers 670 670 670 670 670
Yield 30 35 40 45 48
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Acreage 1.5 1.5 1.5 1.5 1.5

MT 2000 2345 2680 3015 3216
Price/MT (Tshs) 620,000 650,000 690,000 700,000 700,000
Farmer Price/kg (Tshs) 550 550 600 600 630
Cost warehouse/kg (Tshs) 36 36 40 45 45

The estimated price per kg is Tshs 620/kg while the total costs Tshs 586/kg in the 1 st
year. That amount includes the payment to farmer of Tshs 550.10. That amount is
projected to grow up to Tshs 700/kg while the farmers will be paid Tshs 630/kg by the
5th year. Total operational costs will be Tshs 36/kg that will reach Tshs 45/kg in the 5 th
year. Those parameters were used to projects

Table 3: Income and Profitability KWACHAGA INCOME AND PROFITS

YEAR1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL
INCOME
SALES AND OWN
CONSUMPTION 1,240,000,000 1,522,950,000 1,849,200,000 2,110,500,000 2,344,500,000 9,067,150,000
Working capital 216,000,000 300,000,000 350,000,000 390,000,000 420,000,000 1,676,000,000
TOTAL 1,456,000,000 1,822,950,000 2,199,200,000 2,500,500,000 2,764,500,000 10,743,150,000

COST
PAYEMENTS TO
FARMERS 1,100,000,000 1,289,750,000 1,608,000,000 1,809,000,000 2,026,080,000 7,832,830,000
REPLACEMENT 0 0 12,000,000 36,000,000 0
GENERAL 72,000,000 93,800,000 107,200,000 136,750,000 160,800,000 570,550,000
MAINTAINANCE 6,550,000 6,550,000 7,200,000 7,400,000 7,500,000 35,200,000
INVESTMENT 0 0 0 0 0 0
TOTAL 1,178,550,000 1,390,100,000 1,734,400,000 1,989,150,000 2,194,380,000 8,438,580,000
Gross Income 277,450,000 432,850,000 464,800,000 511,350,000 570,120,000 2,304,570,000

WORKING CAPITAL 216,000,000 300,000,000 350,000,000 390,000,000 420,000,000 1,676,000,000

INTEREST 43,200,000 60,000,000 70,000,000 78,000,000 84,000,000 335,200,000
259,200,000 360,000,000 420,000,000 468,000,000 504,000,000 2,011,200,000
Net Income 18,250,000 72,850,000 44,800,000 43,350,000 66,120,000 245,370,000

The projections in Table are the basis for the cash flows below.
Table 4 Cash Flows Projections
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
INCOME
SALES 1,240,000,000 1,522,950,000 1,849,200,000 2,110,500,000 2,344,500,000
SUBTOTAL 1,240,000,000 1,522,950,000 1,849,200,000 2,110,500,000 2,344,500,000
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FINANCING SOURCES
LOAN FOR WORKING
CAPITAL 216,000,000 300,000,000 310,000,000 370,000,000 400,000,000
WORKING CAPITAL OWN
RESOURCES 0 40,000,000 20,000,000 20,000,000
SUBTOTAL 216,000,000 300,000,000 350,000,000 390,000,000 420,000,000
TOTAL INCOME 1,456,000,000 1,822,950,000 2,199,200,000 2,500,500,000 2,764,500,000
EXPENSES
REPLACEMENT 0 0 12,000,000 36,000,000
SUBTOTAL 0 0 12,000,000 36,000,000 0
RECURRENT COSTS

PAYEMENTS TO FARMERS 1,100,000,000 1,289,750,000 1,608,000,000 1,809,000,000 2,026,080,000

GENERAL 72,000,000 93,800,000 107,200,000 136,750,000 160,800,000
MAINTAINANCE 6,550,000 6,550,000 7,200,000 7,400,000 7,500,000
SUBTOTAL 1,178,550,000 1,390,100,000 1,722,400,000 1,953,150,000 2,194,380,000
FINANCING PAYMENTS
WORKING CAPITAL –
CAPITAL 216,000,000 300,000,000 350,000,000 390,000,000 420,000,000
WORKING CAPITAL
INTEREST 43,200,000 60,000,000 70,000,000 78,000,000 84,000,000
SUBTOTAL 259,200,000 360,000,000 420,000,000 468,000,000 504,000,000
TOTAL EXPENSES 1,437,750,000 1,750,100,000 2,154,400,000 2,457,150,000 2,698,380,000

PROFIT BEFORE
FINANCING 18,250,000 72,850,000 44,800,000 43,350,000 66,120,000

PROFIT AFTER FINANCING 18,250,000 72,850,000 44,800,000 43,350,000 66,120,000

CUMULATIVE CASH FLOW 18,250,000 91,100,000 135,900,000 179,250,000 245,370,000

The income and profit including the cash flows construction costs are not factored in as
the warehouse does not belong to the producers. The warehouse will be rented to the
producers through their FO by the District Authorities. To both the profits and cash flow
projections indicates that the investment is potentially viable. The key profitability as
measured by is IRR of 44.59% and NPV 480,549,984.

4.1.2 Individual maize producers

At individual farmers’ level, production movements per acre are projected to be at the
current level of 25 bags of 100kgs to 48 bags in the 5 th year. Acreage has been
maintained at 1.5 (although expansion is expected) but through better availability of
inputs, better farm and post harvest management all will lead to higher production and
acceptable market yield. All those will be the result of the assurance of inputs, market
and good prices. Thus in the 1st year with production of 2500 kgs the cost will be Tshs
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178/kg and the net margin will be 55% while in the 5 th year production is projected to be
4800kgs and each kg will cost Tshs 114 and thus enabling farmers to realize 69% net
margin. More details that indicate production will be viable and meet the needs of the
warehouse are attached.

4.1.3 Actors Roles

The services for market linkages will be provided through Warehouse Receipt System.
Together with the services, opportunities for producers to access production
enhancement will be organized and provided. The main actors for making the system to
function are the maize producers, farmer groups and Farmer Association. The other
key actors will be the Warehouse Operator, Inputs suppliers and Financial Institutions.
District Authorities also will be among of the stakeholders and a beneficiary. Currently
those in place are the farmers, Warehouse Operator, several agro-dealers and financial
services providers (list attached). Those that need to be supported and formed are the
groups and the Farmers Association.

Currently there are 4 groups (Mkombozi, Nguvukazi, Urafiki and Chapakazi) with total
of 93 members with 40% of them being women. The projections over five years will
require minimum of 670 farmers each utilizing a minimum of 1.5 acres. Thus there will
be a need to mobilize and organize 577 producers into at least 29 producer groups of
20 members. For the groups to function effectively, the members will need to learn
about the working of the system, financial and investment literacy including undertaking
related diversification of economic activities. That will enable the members to develop
resilience against seasonal income shocks. It is through the groups in which all
services will flow to the individual producers. Thus in organizing them their operational
systems will have to fit in the WRS system.

To enable the producers through the groups to produce the volumes required and
deliver to the warehouse while adhering to quality and standards a Farmer
Organization (FO) will be a necessity. The organization responsibilities will be to
coordinate and ensure availability of inputs, financial services/credits including all
deliveries to the warehouse and payments to farmers. Seeking financing facility for
paying the farmers and recovering the payments and repayment to the banks will be
another important responsibility. Since it will have to deal with the farmers business and
particularly on the availability of inputs and financing then FO can be formed as a not
for profit development company or a cooperative. The costs for providing the services
have been factored in the Farm Gate Profitability Margin.
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5.0 Business case for Kifaru AMCOS

Strengthening Market Linkages Capacities of Kifaru AMCOS to Coordinate

Services Provision through Off-takers, Agro-dealers and Financial Institutions

5.1 Kifaru AMCOS

Kifaru AMCOS is a registered FO that obtained registration in 2012 through the
Cooperative Act. Its Registration No. is TAR 564. The main functions are to buy quality
maize from members and farmers in Kwankoje village, store maize at the Kwankoje
village warehouse for fee and sale maize to large traders and the NRFA. Through
MIVRAF-PEML Component, the AMCOS and its members have benefited by learning
marketing linkages skills, improving productivity and accessibility to inputs. The
members are now able to produce up to 2000kgs/acre. Direct beneficiaries are 104
while potentially can the services can benefit up to 1000 households. Through the
PEML support the AMCOS initiated collection and selling of maize through the village
warehouse at Kwankoje and in the ended season the volumes collected and sold
were////worth Tshs/////. The AMCOS is based in Kwankoje village and operates through
the village warehouse.

5.1.1 Viability situation

The primary actors that will enable the system to become operationally and financially
viable are the farmers and the AMCOS that will need to embark on process of change
and become business oriented and thus attract other players. The other players will
include the off-takers, inputs suppliers and the financial institutions. At the AMCOS
level, the viability assessment is based on the business plan prepared in early 2017 for
maize trading while at producers level is based on the projections done by using data
collected as part of implementing PEML Component. The financial profitability and cash
flows from the business plan have been adjusted to accommodate 150 farmers in the
1st year are expected to grow up to 600 farmers in the 5 th year. Thus the direct
beneficiaries would be the members who are the owners of the AMCOS and others will
be those who will join or decide to access services from the AMCOS. Others to join
efforts will be directed towards promoting the AMCOS services.

The warehouse that will accommodate the operations has capacity of 100MT but the
target is to handle up to 400MT by 4 th and 5th year. In 1st year (2017/18), total of 100MT
will be handled that will in the 1 st year need Tshs 69.10 million to finance collection and
storage operations. The financing will grow up to Tshs 251 in the 5 th year. The costs are
for buying, storage and other general operations.
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Table 5: Kifaru AMCOS Income and Profits

Kifaru AMCOS INCOME AND PROFITS
YEAR1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL
INCOME
SALES 74,400,000 97,500,000 138,000,000 280,000,000 280,000,000 869,900,000
Working capital 25,000,000 25,000,000 30,000,000 30,000,000 30,000,000 140,000,000
TOTAL 99,400,000 122,500,000 168,000,000 310,000,000 310,000,000 1,009,900,000

COST
PAYEMENTS TO FARMERS 66,000,000 82,500,000 120,000,000 248,000,000 248,000,000 764,500,000
REPLACEMENT 0 0 0 0
GENERAL 360,000 720,000 1,200,000 1,200,000 2,400,000 5,880,000
MAINTAINANCE 500,000 600,000 700,000 1,200,000 1,500,000 4,500,000
INVESTMENT 2,240,000 0 0 0 0 2,240,000
TOTAL 69,100,000 83,820,000 121,900,000 250,400,000 251,900,000 777,120,000
Gross Income 30,300,000 38,680,000 46,100,000 59,600,000 58,100,000 232,780,000

WORKING CAPITAL 25,000,000 25,000,000 30,000,000 30,000,000 30,000,000 140,000,000

INTEREST 5,000,000 5,000,000 6,000,000 6,000,000 6,000,000 28,000,000
30,000,000 30,000,000 36,000,000 36,000,000 36,000,000 168,000,000
Net Income 300,000 8,680,000 10,100,000 23,600,000 22,100,000 64,780,000

At individual producers level the key parameters of viability are the movements across
the years are on acceptable total and individual marketable yields, costs for production
and storage and net margins. Thus in the 1 st year acceptable total acceptable yield is
3000kgs/acre that will cost Tshs 156/kg. The acceptable marketable yield is expected
to reach 4500kgs/acre while costs of production will be Tshs 135/kg. Net margin is
expected to be Tshs 379/kg in the 1st year and will increase by 18.7% and reach Tshs
450/kg in the 5th year.

Table 6: Kifaru Producer Viability Parameters

Parameter Yr 1 Yr 2 Yr 3 Yr4 Yr5
Farmers 670 670 670 670 670
Yield –kgs/acre 3000 3500 4000 4500 4800
Acreage 1.5 1.5 1.5 1.5 1.5
MT 2000 2345 2680 3015 3216
Price/MT (Tshs) 620,000 650,000 690,000 700,000 700,000
Farmer Price/kg (Tshs) 550 560 600 600 630
Production costs/kg 135 135 135 135 135
Cost warehouse/kg (Tshs) 36 36 40 45 45
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Net Margin (Tshs) 379 389 420 425 450

Cash flows as provided in Table 7 below are projected with sales amounting to Tshs
74.40 million that will reach Tshs 280.00 million in the 5 th year. Working capital from
banks will be Tshs 25.00 million and by the 5yht year will be Tshs 30.00 million at an
interest rate of 20% annually. Net margins rise from Tshs 0.30 million to 22.10 million in
the 5th year.
Table 7: Kifaru Cash Flow Projections
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
INCOME
SALES 74,400,000 97,500,000 138,000,000 280,000,000 280,000,000
SUBTOTAL 74,400,000 97,500,000 138,000,000 280,000,000 280,000,000
FINANCING SOURCES
LOAN FOR WORKING CAPITAL 25,000,000 25,000,000 30,000,000 30,000,000 30,000,000
WORKING CAPITAL OWN
RESOURCES 0
SUBTOTAL 25,000,000 25,000,000 30,000,000 30,000,000 30,000,000
TOTAL INCOME 99,400,000 122,500,000 168,000,000 310,000,000 310,000,000
EXPENSES
RECURRENT COSTS
PAYEMENTS TO FARMERS 66,000,000 82,500,000 120,000,000 248,000,000 248,000,000
GENERAL 360,000 720,000 1,200,000 1,200,000 2,400,000
MAINTAINANCE 500,000 600,000 700,000 1,200,000 1,500,000
INVESTMENT COST 2,240,000
SUBTOTAL 69,100,000 83,820,000 121,900,000 250,400,000 251,900,000
FINANCING PAYMENTS
WORKING CAPITAL -CAPITAL 25,000,000 25,000,000 30,000,000 30,000,000 30,000,000
WORKING CAPITAL INTEREST 5,000,000 5,000,000 6,000,000 6,000,000 6,000,000
SUBTOTAL 30,000,000 30,000,000 36,000,000 36,000,000 36,000,000
TOTAL EXPENSES 99,100,000 113,820,000 157,900,000 286,400,000 287,900,000
PROFIT AFTER FINANCING 300,000 8,680,000 10,100,000 23,600,000 22,100,000
CUMULATIVE CASH FLOW 300,000 8,980,000 19,080,000 42,680,000 64,780,000

5.1.2 Actors Roles

The services for market linkages will be provided through entering in to contractual
agreements with buyers through pre-seasons meetings, collection and aggregation and
delivery to same buyers. To facilitate production inputs suppliers will be contracted to
supply inputs through one supplier approach and hence the contracted supplier will be
part of the institutional arrangements. That also will apply to the financial services
providers. At individual farmers levels they will have to adhere to the operations
requirements by providing information that will allow pre-seasons actors planning
17

meetings to be conducted, plant and manage farm plots and post harvest activities as
agreed upon and delivery of the maize products to the collection centers specified. The
AMCOS roles will include conducting pre-season planning meeting that will be attended
by the actors that have agreed to work together, seeking financing of collection and
inputs required. It will also be responsible ensuring the actors conforms to the agreed
upon working norms, payment to farmers and repayment of loans.

6.0 Business case for Mauya AMCOS

Strengthening Market Linkages Capacities of Mauya AMCOS to Coordinate

Services Provision through Off-takers, Agro-dealers and Financial Institutions

6.1 Mauya AMCOS

Mauya AMCOS is a located at Chogo village, Kabuku Ndani Ward. The AMCOS
started as a farmer group in 2007 and became a cooperative society in 2009. Its
registration no is TAR 537. Members are 67 while beneficiaries of its services are 599.
The organization structure is composed the members Board, Secretary and Treasurer.
The AMCOS has assets including a warehouse and previously has operated collective
storage and marketing of maize.

6.1.1 Viability situation

The primary actors that will enable the system to become operationally and financially
viable are the farmers and the AMCOS that will need to embark on process of change
and become business oriented and thus attract other players. The other players will
include the off-takers, inputs suppliers and the financial institutions. At the AMCOS
level, the viability assessment is based on the business plan prepared in early 2017 for
maize trading while at producers level is based on the projections done by using data
collected as part of implementing PEML Component. The financial profitability and cash
flows from the business plan have been adjusted to accommodate 100 farmers in the
1st year are expected to grow up to 600 farmers in the 5 th year. Thus the direct
beneficiaries would be the members who are the owners of the AMCOS and others will
be those who will join or decide to access services from the AMCOS. Others to join
efforts will be directed towards promoting the AMCOS services.

The warehouse that will accommodate the operations has capacity of /////MT but the
target is handling 1,800MT in the 1st year and the volumes are expected to reach
2,900MT in the 5th year. Financing the payments to members and storage costs will
require Tshs 990.00 million that will grow up to Tshs 1.769 million. The AMCOS will
18

have to borrow Tshs 400.00million in the 1st year and the 5th year borrowing will reach
Tshs 850.00 million.

Table 8. Mauya Profitability Projections

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

INCOME
SALES 1,116,000,000 1,560,000,000 1,725,000,000 1,890,000,000 2,059,000,000
WORKING CAPITAL 400,000,000 670,000,000 720,000,000 850,000,000 850,000,000
TOTAL 1,516,000,000 2,230,000,000 2,445,000,000 2,740,000,000 2,909,000,000

COST

PAYMENTS TO FARMERS 990,000,000 1,344,000,000 1,500,000,000 1,620,000,000 1,769,000,000

REPLACEMENT 0 0 0 5,800,000 0
GENERAL 11,500,000 16,500,000 18,000,000 18,400,000 23,000,000
MAINTAINANCE 3,400,000 4,000,000 0 4,000,000 0
INVESTMENT 6,300,000 0 0 0 0
TOTAL 1,011,200,000 1,364,500,000 1,518,000,000 1,648,200,000 1,792,000,000
GROSS PROFIT 504,800,000 865,500,000 927,000,000 1,091,800,000 1,117,000,000
WORKING CPAITLA AND
INTEREST
WORKING CAPITAL 400,000,000 670,000,000 720,000,000 850,000,000 850,000,000

WORKING CAPITAL INTEREST 80,000,000 134,000,000 144,000,000 170,000,000 170,000,000

WORKING CAPITAL INTEREST 480,000,000 804,000,000 864,000,000 1,020,000,000 1,020,000,000

NET INCOME 24,800,000 61,500,000 63,000,000 71,800,000 97,000,000

At individual producers level the key parameters of viability are the movements across
the years on acceptable total and individual marketable yields, costs for production and
storage and net margins. The total costs (buying, storage and other general operations)
will be Tshs 586/kg that will reach Tshs 675/kg in the 5 th year. The prices and the total
costs will allow a net margin of Tshs 379/kg in the 1 st year and grow by 18.7% and
reach Tshs 450/kg

Table 9. Producer Viability Parameters

Parameter Yr 1 Yr 2 Yr 3 Yr4 Yr5
Farmers 670 670 670 670 670
Yield 30 35 40 45 48
Acreage 1.5 1.5 1.5 1.5 1.5
MT 1800 2400 2500 2700 2900
19

Price/MT (Tshs) 620,000 650,000 690,000 700,000 700,000

Farmer Price/kg (Tshs) 550 550 600 600 630
Cost of production/kg 135 135 135 135 135
Cost warehouse/kg (Tshs) 36 36 40 45 45
Net Margin/kg Tshs 379 389 420 425 450

Projected cash flows indicate that sales in the 1 st year will be Ths 1.15 billion with net
profit of Tshs 24.8 million. The net margin is expected to reach Tshs 97.01 in the 5 th
year while the sales generated will be Tshs 2.059 billion.

Table 10: Mauya Cash Flows

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
INCOME
SALES 1,116,000,000 1,560,000,000 1,725,000,000 1,890,000,000 2,059,000,000
SUBTOTAL 1,116,000,000 1,560,000,000 1,725,000,000 1,890,000,000 2,059,000,000
FINANCING SOURCES
LOAN FOR WORKING CAPITAL 400,000,000 670,000,000 720,000,000 850,000,000 850,000,000
SUBTOTAL 400,000,000 670,000,000 720,000,000 850,000,000 850,000,000
TOTAL INCOME 1,516,000,000 2,230,000,000 2,445,000,000 2,740,000,000 2,909,000,000
RECURRENT COSTS
PAYEMENTS TO FARMERS 990,000,000 1,344,000,000 1,500,000,000 1,620,000,000 1,769,000,000
GENERAL 11,500,000 16,500,000 18,000,000 18,400,000 23,000,000
REPLACEMENT 0 0 0 5,800,000 0
MAINTAINANCE 3,400,000 4,000,000 0 4,000,000 0
INVESTMENT COST 6,300,000
SUBTOTAL 1,011,200,000 1,364,500,000 1,518,000,000 1,648,200,000 1,792,000,000
FINANCING PAYMENTS
WORKING CAPITAL -CAPITAL 400,000,000 670,000,000 720,000,000 850,000,000 850,000,000
WORKING CAPITAL INTEREST 80,000,000 134,000,000 144,000,000 170,000,000 170,000,000
SUBTOTAL 480,000,000 804,000,000 864,000,000 1,020,000,000 1,020,000,000
TOTAL EXPENSES 1,491,200,000 2,168,500,000 2,382,000,000 2,668,200,000 2,812,000,000

PROFIT BEFORE FINANCING 24,800,000 61,500,000 63,000,000 71,800,000 97,000,000

PROFIT AFTER FINANCING 24,800,000 61,500,000 63,000,000 71,800,000 97,000,000
CUMULATIVE CASH FLOW 24,800,000 86,300,000 149,300,000 221,100,000 318,100,000

6.1.2 Actors Roles

The services for market linkages will be provided through entering in to contractual
agreements with buyers through pre-seasons meetings, collection and aggregation and
delivery to same buyers. To facilitate production inputs suppliers will be contracted to
supply inputs through one supplier approach and hence the contracted supplier will be
20

part of the institutional arrangements. That also will apply to the financial services
providers. At individual farmers levels they will have to adhere to the operations
requirements by providing information that will allow pre-seasons actors planning
meetings to be conducted, plant and manage farm plots and post harvest activities as
agreed upon and delivery of the maize products to the collection centers specified. The
AMCOS roles will include conducting pre-season planning meeting that will be attended
by the actors that have agreed to work together, seeking financing of collection and
inputs required. It will also be responsible ensuring the actors conforms to the agreed
upon working norms, payment to farmers and repayment of loans.

7.0 Benefits
The benefits that will be realized from the execution of the proposed business cases will
be felt by the farmers, off-takers, inputs suppliers, financial instructions and the district
economy. Marketing of the maize in the three centers will generate total income of
Tshs5.482Billion and thus contributing to uplifting the incomes of the farmers to the level
above the national income average and that will translate to 1,800farmers (direct
beneficiaries) and over 10,000 farmers (indirect beneficiaries) crossing over the
subsistence level. At district level it is expected to open new opportunities to other
maize farmers who through promotion efforts will join the services including establishing
similar ones in strategic places in the district. Specifically for the farmers there will be
assurance of markets for their maize, overcoming the exploitation from informal buyers,
growth in net income from up to above the national average of Tshs 763,331 and overall
livelihoods improvement. Others are farmers will learn and intensify production to
4800kgs/acre, there will be an increase in marketable yield due to reduced post harvest
losses, increase in productivity and quality especially reduction of contaminations.

8.0 Tasks of the Service Provider

8.1 Kwachaga Warehouse
 To identify the major actors of the consortium through a structured baseline
survey (situation analysis, profiling of actors, business relationship, etc)
 Prepare Business Plan/Bankable Business Proposal for the Kwachaga
Warehouse for the Kwachaga warehouse project (Review)
 Conducts Training need requirements for Kwachaga warehouse managing team

 Facilitates the process of determining of the necessary equipment required to

operate a warehouse taking into account requirements of the warehouse act

 Facilitates the Kwachaga warehouse to register the warehouses in accordance

to TWLB requirements
21

 Conduct farmer’s platform meetings in the 12 villages to enable groups to

understand the working modalities. The meeting will include also presentation of
the responsibilities of the groups and members
 To sensitize and promote the understanding the general concepts on conducting
maize trading through the consortium model
 To provide capacity building to the actors to all issues pertaining to the trading
business through a consortium (Sensitizes, farmers, LGA staff at district, ward
and village levels with basic knowledge and skills on consortium concept, market
access, warehouse management, business linkage models).
 Sensitizes and mobilizes farmers/SHPGs to understand and operate the
Consortium system (warehouse qualities, warehouse act, quality control of
maize from farm to store)

 To set guidelines on preparation of “Annual Work Planning and Budgeting for the
Farmer Organization

 Prepare draft memorandum of understanding of the willing actors for the

Proposed Business Consortium and develop an agreed legal document

 Kick start the formation of the consortium

 At initial stages coordinating pre-season planning and meetings (production

projections, sales targets, inputs and other requirements required on credit,
selection of inputs and other services suppliers). Coordinate meetings between
the groups and off-takers. Focus will be to agree on quality, prices, volumes and
delivery conditions, terms of payment. Coordinate meetings between the groups
and inputs suppliers. Focus will be to agree on inputs, quality specifications,
prices, delivery conditions and terms of paying. To conduct meetings with the
groups on payments terms to group members. Conduct meetings with the
groups to discuss costs for providing the services and payments terms. Agreed
on start of the season. Locate maize aggregation points
 Prepare Operation manuals for the Business Consortium and supervise
implementation
 Support maize production through advisory services
 Inform off-takers of the availability and arrange delivery in accordance to the
contracts/agreements
 Assist the Kwachaga warehouse management to establish a financial facility
such as a SACCOS and vikoba
 Networking between depositors, MIVARF, LGA, Ministries, off-takers, input
suppliers, financial institution, and reporting
22

 Develop calendar of meetings of the consortium

 Conduct end of season meetings with groups. Focus to be on assessing

achievements, evaluating inputs/service providers and off-takers and challenges
as part of the preparations for next season. The meeting also will be for agreeing
on next season planning.

8.2 Mauya and Kifaru AMCOS

 To identify the major actors of the consortium through a structured baseline
survey and promote the business model including initiating the business
relationships among the actors.
 Review the business plans to accommodate the agreed upon working
relationships and other factors put forward in this business case.
 Support the AMCOS leaders in promoting the services among farmers in the
villages earmarked.
 To sensitize and promote the understanding the general concepts on conducting
maize trading through the consortium model
 To provide capacity building to the actors and key stakeholders to all issues
pertaining to the trading arrangements business through a consortium
(Sensitizes, farmers, LGA staff at district, ward and village levels with basic
knowledge and skills on consortium concept, market access, warehouse
management, business linkage models).
 To set guidelines on preparation of “Annual Work Planning and Budgeting for the
Farmer Organization

 Prepare draft memorandum of understanding of the willing actors for the

Proposed Business Consortium and develop an agreed legal document

 Kick start the formation of the consortium

 At initial stages coordinating pre-season planning and meetings (production

projections, sales targets, inputs and other requirements required on credit,
selection of inputs and other services suppliers). Coordinate meetings between
the groups and off-takers. Focus will be to agree on quality, prices, volumes and
delivery conditions, terms of payment. Coordinate meetings between the groups
and inputs suppliers. Focus will be to agree on inputs, quality specifications,
prices, delivery conditions and terms of paying. To conduct meetings with the
groups on payments terms to group members. Conduct meetings with the
groups to discuss costs for providing the services and payments terms. Agreed
on start of the season. Locate maize aggregation points
23

 Prepare Operation manuals and guide leaders in using them.

 Support maize production through advisory services
 Inform off-takers of the availability and arrange delivery in accordance to the
contracts/agreements
 Provide financial and investment literacy learning to farmers including formation
of financial services (SACCOS/Vikoba
 Guide end of season meetings with groups. Focus to be on assessing
achievements, evaluating inputs/service providers and off-takers and challenges
as part of the preparations for next season. The meeting also will be for agreeing
on next season planning.

9.0 Proposed work plan

Implementation Plan 2018-19

Activities 2018

Jan Feb Mar Apr. Jun. Jly Aug. Sept Oct. Nov. Dec. 2019
1. To identify the major actors
of the consortium through
structured baseline surveys and review
2. To prepare/Review business
plans/Bankable business proposals
for Kwachaga, Chogo, Kwankonje
Warehouses
3. To conduct training need
requirements for Kwachaga,
Chogo and Kwankonje warehouses
4. Facilitate the processes of
determining of the necessary
equipments needed for the
Warehouses
5. Facilitate the Kwachaga, Chogo,
and Kwankonje warehouses to
register in accordance to TWLB
requirements.
6. To conduct farmers platform
meetings in the villages to
enable groups to understand
the working modalities of the consortium
7. To sensitize and promote the
general concept of conducting
24

maize trading through consortium

Models
8. To provide capacity building to
the actors to all issues pertaining
to consortium models
9. To sensitize and mobilize farmers,
to understand and operate consortium
systems update annually
10. To set guidelines on preparation of
" Annual Work Planning and budgeting
for Kwachaga farm organization, Mauya
Amcos and Kifaru Amcos
11. Preparation of draft MOUs for the
proposed consortium and prepare
legal documents
12. Kick start the formation of business
consortiums for Kwachaga, Chogo and
Kwankonje warehouses
13. At initial stage, coordinate the pre-
season planning and meetings
between farmers offtakers, input
suppliers and financial institutions
14. Prepare operation manuals for the
business consortiums and supervize
Implementation
15. Support maize production through
advisory services
16. Inform off-takers of the availability
of maize grain and arrange deliveries
in accordance to the contracts/agreements
17. Assist Kwachaga and Kwankonje
managements to establish rural financial
facilities such as saccos and vikoba and
strengthen Mauya Amcos
18. Network between depositors, Mivarf,
LGAs, Ministries, off-takers, input suppliers
financial institutions and reporting
19. Develop calendar of meetings of the
consortiums.
20. Conduct end of season meetings with
the groups and assess
achievements and challenges as part
of the preparations for next season
25