Strength in numbers: Encouraging aggregation via the development of integrated projects

While the Green Morocco Plan (Plan Maroc Vert, PMV), launched in 2008, has brought about significant changes to Moroccan agriculture, the sector remains constrained by a number of obstacles, such as limited water resources, farm fragmentation, outdated infrastructure and inadequate distribution channels. One of the solutions outlined in the PMV to address these issues is to encourage aggregation through the development of fully integrated projects to allow for the mobilisation of investment, the pooling of resources and the development of stronger ties along the supply chain.

Although the number of projects has been increasing slowly, there have been several success stories so far in strategic segments, notably in cereals, dairy and sugar, bringing producers, manufacturers and distributors closer together. Better organisation of the system is also slowly being achieved as the management of projects is gradually shifted from cooperatives – on which the model largely relied to begin with – to a central organiser with the required knowledge and necessary resources to efficiently and effectively carry out these projects.

ASSISTING SMALL-SCALE FARMERS: Land fragmentation and the dominance of small farms have long hindered the development of Moroccan agriculture. With 70% of farmers operating on plots of less than 5 ha, the aggregation of producers was put forward as a way to extend cultivated areas, maximise productivity, as well as enhance the value and the commercialisation of agricultural goods. Better collaboration between upstream and downstream activities would ensure smallholders in particular have access to modern machinery, high-quality materials, financing and export markets.

Consequently, and in line with the objectives outlined in the second pillar of the PMV, assisting smallholders and involving small-scale farmers in fully integrated projects would contribute towards alleviating poverty and improving conditions for the rural population, who account for 45% of the country’s inhabitants and the majority of whom (85%) depend on agriculture for a living.

The idea is to help smallholders integrate large investments, deal with fragmentation, and enhance productivity and value addition by having a central organiser manage a project which includes bringing small-scale producers closer together.

A variety of projects have already been launched to this end and proved successful, most notably in the cereals, citrus, poultry and dairy segments. Incentives introduced to encourage aggregation aim mainly at easing access to finance, considering only an estimated 18% of farmers take out credit.

Integrated projects – projects which have succeeded in bringing farmers and agribusiness closer together – also benefit from certain financial incentives associated with the acquisition of irrigation equipment; these cover 100% of investments in localised irrigation projects, instead of 80%, and 70% for complementary irrigation, instead of 50%. As for the acquisition of agricultural equipment, subsidies range between 30% and 70%.

INTEGRATED PROJECTS: 120 integrated cereal projects were planned under the PMV, although only two have been realised so far. The first, known as Tanmia Al Filahia, was created in 2009 in the region of Chaoui and is a grouping of Moroccan companies Charaf, Fertima, Tria and les Moulins du Maghreb. The aim of this project is to bring their production to 6m tonnes of cereals and extend cultivated areas to 150,000 ha. The second project, created in 2010 in the Doukkala region, was formed by the Moroccan Agricultural Cooperative of Doukkala. The project aims to expand its planted area from 1500 ha in 2010 to 4500 ha in 2014 and increase production from 75,000 tonnes to 270,000 tonnes.

Sugar is another segment that has benefitted from aggregation. Following its acquisition of four state-owned refineries in 2005, Compagnie Sucrière Marocaine et de Raffinage (Cosumar), the country’s sole sugar producer, embarked on a strategy by which it brought together 80,000 small producers mainly in the regions of Doukkala, Gharb, Loukkos, Tadla and Moulouya. These efforts resulted in a rise in productivity for sugar beets in particular, increasing from an average of 7.8 tonnes per ha in 2006 to 9.5 tonnes in 2012. Following the new contract programme signed in 2013, sugar cane and sugar beets are expected to see planted areas expanded to 28,200 ha and 66,500 ha, respectively, by 2020.

In the milk and dairy segment, Nestlé signed an agreement in April 2012 to invest Dh50m (€4.4m) by 2015 to encourage the aggregation of milk producers in Doukkala-Abda, a region accounting for 22% of national milk production. The agreement signed with the Agency for Agricultural Development and the Regional Directorate for Agriculture in Doukkala-Abda is in line with the sector plan to double the local production of milk by 2020. The project will involve more than 10,700 milk producers, 17,700 dairy cows organised around 130 cooperatives for milk collection. Another aggregated dairy project in the region includes Centrale Laitière, Morocco’s leading milk producer, which was acquired by French group Danone in July 2012. The project, with an investment of Dh1.85bn (€164.3m), is in the process of being validated and will gather 29,000 milk producers around 201 cooperatives and 83 milk collection points.

IMPACT & CHALLENGES: Although aggregation has proved successful in a number of segments, its overall impact remains limited and difficult to gauge, while a number of challenges have surfaced. “The integration of upstream and downstream activities is challenging due to contrasting interests on the part of farmers and industrialists. Aggregation therefore needs to be encouraged and the farmer needs to be involved in all parts of the production process,” Ahmed Darrab, the secretary-general of the Moroccan Association of Citrus Producers, told OBG.

Access to finance also remains a challenge for many producers, notably smallholders, as banks are reluctant to allocate the necessary funds for greater integration or expansion.

To support smallholders, Groupe Crédit Agricole du Maroc created an agricultural development funding mechanism (Société de Financement pour le Développement Agricole) in 2010 in partnership with the government. Also known as Tamwil El Fellah, the programme was eventually extended to include smallholders involved in aggregation projects. The fund’s target was to provide 20,605 farmers with Dh600m (€53.3m) in funding in 2013. A total of €20m was also allocated by the French Development Agency in July 2013 to support and stimulate the activities of Tamwil El Fellah.

The aggregation system’s framework also poses a challenge according to Darrab. “Aggregation is an excellent model to develop upstream and downstream activities. However, the concept was launched before putting in place the necessary tools for its success, such as a regulatory framework and adequate logistics to accompany its implementation,” Darrab said. “The rights and duties of both parties were not clearly identified. Authorities are, however, currently looking into ways to rectify this.”

INSURANCE & RISK MANAGEMENT: Another major part of securing investment in the sector and supporting the implementation of the objectives outlined in the PMV is mitigating risks, particularly in the face of volatile and unpredictable weather conditions in recent years, which have negatively affected production levels as well as socio-economic development more broadly. Aggregation could be made more attractive to producers, and devising guarantee mechanisms to support the development of the strategy is crucial. This is especially important when it comes to ensuring costs for producers and hedging against natural disasters that can affect crops that are destined for processing.

In light of increased losses and the need to secure farmer revenues, state-backed insurance schemes were devised in the past to hedge mainly against drought. In 2011 the Ministry of Agriculture and Fisheries oversaw the creation of a new agricultural insurance scheme in partnership with the Moroccan Mutual Agriculture Insurance Agency, and a crop insurance programme was devised to mitigate financial losses due to weather conditions affecting cereals and pulses nationwide.

The programme, which provided insurance coverage for 327,000 ha in 2012, an increase from 100,000 ha in 2011, has already exceeded its 300,000-ha target and is expected to expand coverage to a total of 1m ha by 2015. Authorities are currently working on extending the scheme to cover fruit tree plantations, notably olives and citrus fruit. In addition to the programmes already in place, the government, in collaboration with the World Bank, is at present also looking into ways to strengthen agricultural insurance through public-private partnerships.