Phata Sugarcane Outgrowers Cooperative

Background

Phata Sugarcane Outgrowers Cooperative is a smallholder farmer owned organisation that was formed in 2011. The cooperative was established in partnership with Agricane as the technical and administrative partners. Agricane is an Agricultural Development and Management company that provides technical support to both smallholder and commercial sector.

The Cooperative has 380 household members who were growing cotton and sorghum on the land now being used for sugarcane production. Their shareholding in the cooperative is determined by their original landholding in the allocated area for development. The cooperative developed its own constitution and is governed by a Board made up of farmer representatives and 3 independent directors.

Agricane and Phata managed to secure a €2.4mln Grant from the EU in January 2012 to develop 300 ha of sugarcane under centre pivot irrigation and an additional 10ha under irrigated food crops to provide food security for the members. Development was completed in November 2012 and two cane crops have been harvested since. Additional funding (€380,000) was secured from Agdevco through a capital loan to cater for the own contribution component of the grant.

Apart from the infrastructure and field development a lot of emphasis was put into building the capacity of the cooperative members. Modular training courses were developed to create a better understanding of organisational development, business understanding, how the sugar value chain works, corporate governance, agricultural and environmental trainings, HIV-AIDS and other awareness campaigns.

The cooperative is managed centrally by a small team of staff supported by a management contract with Agricane. Cooperative members take part in a number of activities and are kept abreast of all operational aspects.

Production and Finances

The first season saw a low yield and Estimated Recoverable Sucrose % (ERS%) due to late season harvest but this has been improved by harvesting earlier in the second and third season.

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**Note: 2015/2016 financial figures are estimated

The Cooperative Board has set a dividend policy which pays out 60% of the profits to the shareholders and retains 40% to cover operational expenses for the next season as well as expedite repayment of the capital loan. As a result after just two seasons of production, Phata has become cash positive and, apart from the capital development loan, has no debt. This is largely due to good leadership by the Board and the Committee in ensuring sound fiscal discipline and governance. Income per individual shareholder has also increased and is considerably higher than the income realised from previous crops being grown in this area.  

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Diversification Initiatives

Through their partnership, Phata and Agricane have managed to secure additional funding from a Scottish Aid programme to diversify income from sugarcane. These include:-

1. Food crops such as maize and kidney beans under sprinkler irrigation (24ha)
2. Fish in 10 ponds (1,2ha)
3. Mangoes, Bananas and Oranges under irrigation (2ha)
4. Wood for fuel and construction (6ha)

The Cooperative has also set up a revolving fund for members to access for short term credit to assist with establishing other income generating activities. Phata obtained its Fairtrade certification in January 2015 and is actively pursuing FT markets for sugar in order to maximise the potential benefit from FT premiums.

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Expansion Plans

Through their partnership, Phata and Agricane have recently secured a second grant with the EU to increase the area under cane by an additional 300ha benefiting another 330 potential new household members.

Future Perspective

Provided the cooperative maintains its corporate governance, fiscal discipline and maintains the technical and production standards to maintain high yields the future for its member’s remains very bright with potential to generate a sustainable income. Agricane will build the capacity of the Cooperative members and staff so that it can be managed independently in the next 4 – 5 years.

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