PROMOTING AGRIBUSINESS LINKAGES PAL:

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PROMOTING AGRIBUSINESS LINKAGES (PAL) A
MARKET-BASED APPROACH TO COMBATING
POVERTY Ronald Ramabulana Gary R. Mullins
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• Declining exports and margins
• 1st world subsidized Agric. Sector
• Appetite to invest in agriculture is diminishing
• Commodity dependence
• Prices under constant pressure (volume driven
  production, precision farming, RD, etc)

Agriculture in South Africa
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PAL Institutional Composition

• Corporate Council on Africa (US)
• ECIAfrica (South Africa)

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Other SAIBL Components

• TRADE Regional project for cross-border
• trade
• SAIBL South African International Business
• Linkages
• AGOA Project ensures that agribusiness
  benefit
• from Africa Growth Opportunities Act

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The PAL Mission
To build capacity and competitiveness of
historically disadvantaged, small and medium
South African Agribusiness.
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PAL Goals

• Assist HDE agribusiness through marketing and
  investment partnerships with domestic and
  international companies.
• To measurably increase trade and investment flows
  as well as technology transfer between US and SA
  companies.

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PAL Guiding Principles

• Developing supply and demand linkages between
  existing farmers, associations and companies
• Leverage CCA/ECIAfricas existing networks to
  seek greater sectoral growth
• Incorporate market development approach
• Maximize synergies with other donor and
  government projects to leverage scares resources.

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PAL Targets

• Financial transactions worth R135 million and
  marketing contracts worth R1,130 billion over a
  three year period.
• Contribute to USAIDs SO5 (Creation of jobs and
  increased access to financial markets for the
  Historically Disadvantaged Population).
• To build sustainable institutional mechanisms to
  consistently and comprehensively deliver
  technical assistance leading to domestic and
  international business linkages.

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PALs Key Activities

• Linking historically disadvantaged South African
  agribusinesses with domestic and
  international companies
• Training and technical assistance (TTAF) to
  prepare and support South African small and
  medium agribusinesses for domestic and
  international business transactions, e.g.
  business plan development

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PAL Key Activities (Cont.)

• Technology transfer
• Use established networks

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Case study-Tomato

• Work with 74 factory tomato producers in Musina
• Collectively produce 477 ha under irrigation,
  employ 250 full-time and 1800 part-time
  employees.
• PAL involvement
• Negotiate contract with Tiger Brands valued at
  US 2.8 million
• Technical support through PAL horticulturalist
• Raised production finance from Land Bank
• Results
• Increased production to 23 880 tons
• Secure market for three (3) years
• Improved product quality and higher prices
• Better coordination of logistics reducing
  spoilage and delivery costs

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Case study-Maize

• 32 selected maize producers (4519 ha) in North
  West
• PAL involvement
• In partnership with Monsanto S.A. and FNB
  provided production training
• Negotiated production finance through FNB
• Identified local service provider for production
  and marketing
• Results
• 960 hours of specialized training
• Access to production finance
• 4519 ha. of land back into production valued at
  US 1.35
• Access to reliable markets

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Lessons from PAL

• Way out f poverty trap - go niche, big or be
  strategically positioned
• Agriculture needs investments at a scale to be
  able to make impact on markets and social
  conditions, eg. Tiger Brands in Musina
• Key business principles trust and relationships
  are important to attract reliable markets