AVC-HVC: Afghanistan Value Chains - High Value Crops

Project description / objective

AVC-HVC enables anchor firms to reverse market failures, strengthen backward and forward linkages, drive growth and create jobs for men, women and youth along the dried fruit and nuts, fresh fruit, spices and medicinal crops value chains.

Market systems focus

The majority of large-scale agribusinesses producing for the domestic market operate as family enterprises, focusing on increasing profits by either reducing supplier prices, or compromising product quality, rather than from reducing inefficiencies. This results in a vicious circle in which farmers have little or no incentive to invest in productivity and quality enhancing technologies. Agro-processors are hesitant to invest in improving their processing lines and their customer base relies on highly price-sensitive buyers:

Fresh fruit (e.g. grapes)

A few large exporters are the anchor firms in the fresh fruit market system. Only they have the financial resources and institutional capacity to manage complex cold storage and refrigerated transport functions (e.g. for grapes). Exporters rely heavily on markets with immediate neighbours (Pakistan / Iran) and are missing opportunities further afield (India, Russia, Belarus, China) which would require ISO / HACCP certification. Low quality inputs are a big constraint for producers. Processing facilities to add value to fresh produce are also largely absent.

Dried Fruit

Exporters are also the anchor firms in the dried fruit market system. They have strong incentives to invest in mechanisation and upgrading of grading, sorting and packaging functions. This is necessary in order to consistently achieve quality and hygiene standards for ISO /HACCP certification required to capture lucrative European and Asian markets. Currently most product is exported in bulk (e.g. for low-value sales in open-air markets in India). Production to higher standards is mainly constrained by inadequate drying facilities at the farm level.

Nuts (e.g. walnuts)

Competitiveness and productivity are the main issues in Afghan market system for nuts. There are major issues with productivity declines in existing orchards and post-harvest spoilage losses. Short-term productivity gains are available through improving farmer skills (e.g. pruning) and better irrigation. In the longer term, investment in nurseries and improved (soft-shelled) varieties could open opportunities in markets in Turkey, UAE and perhaps the EU.

Spices & medicinal herbs (e.g. saffron)

The main opportunities in the market system for spices relate to export certification and improved supply chains, to access markets in EU and North America. Afghan producers require better access to finance, training, post-harvest processing and drying technology to increase volumes and quality. In order to achieve certification standards a third-party testing service (for saffron) is required.

Programme interventions

Upgrading plans: co-creating strategies with anchor firms

Following the assessments of growth potential and willingness to invest, AVC-HVC and anchor firms co-create upgrading strategies which outline areas for technical assistance and the firm’s investment commitments. This is distilled into umbrella agreements (Market Actor Partnership Agreement) which frame specific sub-agreements (Deal Notes)

B2B events: linking anchor firms with upstream and downstream value chain actors

The project will strengthen vertical and horizontal integration by organising business to business events. There are three factors that can strengthen vertical coordination, increase loyalty and produce quality in the Afghan context:

1. quality-based price premiums
2. cash or input advances
3. private extension

These constitute the key success factors of illicit agriculture but could also propel the production and export of legal high-value crops. AVC-High Value Crops facilitates anchor firms, financial institutions and agricultural input suppliers to produce a bundle of benefits and services for loyal and high-performing suppliers.

Trade promotion activities: facilitating the engagement of anchor firms

AVC-HVC will identify the firms for which trade promotion constitutes the binding constraint for expansion. The project will provide them with technical support to participate in trade shows and incoming buyer missions. Following trade commitments, AVC-High Value Crops will provide uninterrupted support to the firms until the transactions are successfully concluded.

Supply-chain management

AVC-HVC introduced eProd, a supplier management software that allows anchor firms to organise and manage procurement from large numbers of farmers while maintaining individual profiles. The software also allows for the introduction of automated price premiums and price discounts based on quality.

Training of trainers

To assist farmers to meet stricter standards and benefit from increased productivity, the project delivers training of trainer (TOT) courses to input suppliers and anchor firms. Participants are then equipped to train farmers on areas such as quality-enhancing technologies, crop protection, quality control, and post-harvest handling. The project also facilitates government extension workers’ participation in the TOT programmes, ensuring that they are up to date on technologies and practices that comply with international standards.

To track the delivery of technical recommendations, the project piloted SMS-based extension messaging with three anchor firms, an activity that will be expanded in year two. Input suppliers that participated in the TOT programme were provided with promotional materials and prescription pads which were also used by the project to monitor the dissemination of extension information.

Innovation competition

Bearing in mind the economic impact of post-harvest losses in high-value crops, especially perishables, the project launched the Young Innovators in Agriculture Competition. The competition encourages students in agriculture and veterinary vocational schools in the four regional hubs to produce technology innovations to reduce post-harvest losses.

Compliance: enabling compliance with grades, standards and other market requirements

AVC-HVC focuses food safety and quality standards achieved through training, technical assistance and certification services. They will develop opportunities for each anchor firm to add value to its products, either by accessing new markets, via arbitrage using cold storage, complying with international food safety standards, increasing the efficiency of existing production lines and expanding processing capacity, shifting from bulk exports to consumer packaging, and enabling them to produce and adhere to strict shipping plans.

Finance: facilitating access to agricultural credit

AVC-HVC supports anchor firms to assess strategic capital investments, working capital and trade finance needs in partnership with the Agriculture Development Fund. The emphasis is on co-designing conventional and Islamic financial products to fit the business cycles of traders, processors and exporters of high-value crops, while introducing incentives for the firms to on-lend to their suppliers. .

Notable results (systemic change, poverty impact)

• Established partnerships with 86 firms which is having a positive impact on 19,500 households
• Enabled 12,482 farmers to access new agricultural practices and technologies
• Facilitated exports valued at $5 million and $7 million in new investment in agriculture
• Maintained project beneficiaries consisting of 30 per cent women and 35 per cent youth

Fresh fruit: 4320 farmers, 16 agribusiness, $163,717 exports

Dried fruits & nuts: 3672 farmers, 29 agribusiness, $4,875,801 exports

Medicinal crops: 40 farmers, 2 agribusiness

Spices: 4450 farmers, 15 agribusiness, $14,415 exports

[uploaded September 2020]