Oilseeds Microprocessors’ Profitability Analysis for Malawios.aiccafrica.org/media/Oil seeds...

Oilseeds Microprocessors’ Profitability Analysis for

Malawi

OCTOBER 2017

Oilseed Microprocessors’ Profitability Analysis Report

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List of Abbreviations and AcronymsAICC African Institute of Corporate Citizenship

DAPP Development Aid from People to People

ESCOM Electricity Supply Commission of Malawi

FBS Farmer Farm Business Schools

GI Gross Income

GM Gross Margin

LDT Legumes Development Trust

MBS Malawi Bureau of Standards

TR Total Revenue

TVC Total Variable Costs

NES National Export Strategy

NAIP National Agriculture Investment Plan

OVOP One Village One Product

FBO Farmer Business Organization

FBS Farmer Business School


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ContentsExecutive Summary 4

1.0 Introduction 51.1 Study rationale 5

1.2 Study objectives 5

2.0 METHODOLOGY 52.1 Study Area 5

2.2 Data Collection Techniques 5

2.2.1 Survey Questionnaire 5

2.3 Profitability analysis 6

2.3.1 Techniques for Measuring of Profitability 6

2.3.2 Gross Margin Analysis 6

3.0 RESULTS AND DISCUSSION 63. 1 Descriptive results 6

3.1.2 Choice and source of processing equipment 7

3.1.3 Drivers for investment in agro processing 7

3.1.4 Market for processed products 8

3.1.5 Raw materials 9

3.1.6 Processed Products 9

3.1.7 Production processes 10

3.2 Investment and financing decisions 10

3. 3 Profitability of oilseeds processing 11

3.3.1 Challenges faced by farm business organizations 12

4.1 Conclusion 12

4.2 Recommendations 12


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Executive Summary

Growth in agriculture is the most effective way of reducing poverty in Malawi. In addition to contributing directly to food security, it supports poverty reduction at both micro and macro levels of the economy. The government of Malawi recognizes the importance of the oilseeds to the economy. This recognition is evident in many of the government policies and strategies. Lately, the government embarked on diversification drive to high value oilseeds. This drive has seen promotion of production and productivity of these crops with concomitant promotion of agro processing machinery. Agro processing is especially promoted because processed products are more valuable than raw products. Processed products also have high shelf life relative to unprocessed products.

Oilseed processors however worry of the access to markets of the processed products and profitability of such an enterprise. Microprocessors just like other firms are rational and profitability of an enterprise would persuade them to engage in it full time. It is against this background that this study was conducted to assess and compare profitability oilseeds (groundnuts, soya and sunflower) and to analyse challenges facing the microprocessors with the aim of informing farmers in making decisions. Data were obtained from groups of farmers engaging in oilseeds processing. The respondent microprocessors were drawn across Malawi. A total of 19 microprocessors were sampled for the study.

The study found positive Gross Margins for all the microprocessors, which means that the sampled microprocessors make profit in oilseeds processing enterprises irrespective of the type of raw materials used(whether groundnuts, soya or sunflower). However, the gross margins were higher for sunflower than those for soybeans and groundnuts. The dominant product among sunflower microprocessors was sunflower cooking oil with sunflower cake as a byproduct. Sunflower microprocessors were found to be selling the byproduct which made their gross margins better than the rest. Gross margins for groundnuts were second best.

Groundnut microprocessors had butter, cooking oil, and groundnuts flour as the product in that order. Unlike the sunflower microprocessors, groundnuts microprocessors and no by products reported. Among soya microprocessors soya milk was the dominant product with soya cake as a byproducts. Interestingly the soya cake was not sold by these microprocessors. The study established that lack of market for processed legume products was the main challenge hampering progress of the microprocessors. Most microprocessors were characterized by low production as dictated by manual production of most of their products.

The study recommends that soya milk microprocessors learn from sunflower microprocessors who sale their produce in antenna shops, and consider having retail outlets in nearby trading centers to boost their sales as most of the processing is done in rural settings where demand is low. The study further recommend that microprocessors should be trained in gross margin, market research, costing and pricing skills, and other economic tools so that they take farming as a business.


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1.0 IntroductionThe Malawi government recognizes the contribution of oilseeds in the economy as enshrined in most of the government’s policies and strategies. The National Export Strategy (NES) and National Agriculture Investment Plan (NAIP) for instance stress on diversifying away from the traditional forex earner crops. The NES in particular identifies legumes and oilseeds as key potential crops worthy exploiting. The cultivation of oilseeds, particularly sunflower, groundnut and soybean, has many benefits. Lipita and Kanyenda (undated) cites the export market potential and the multiplier effects that most of the oil seeds have and further point out that oilseeds legumes have remained unexploited.

Rusike, et al., (2013) in explaining the constraints to oil seeds production cites existence of informal markets in Malawi. This market is rudimentary characterized by low selling prices and does not incentivize farmers to continue production. Proponents of export diversification consider agro-processing as panacea to low farm prices experienced by oil seeds farmers. Agro processing increases the shelf life of products, increases the value of the commodity the upshot of which is farmers getting more returns. Some commodities will have products and by products which can both be sold at a profit compared to a scenario where a farmer sells only a raw product. The Legumes Development Trust (LDT) recognizes the importance of legumes and oilseeds (g/nuts, Soya beans and sunflower) to the country’s economy. Legumes and oilseeds may be processed into a wide range of nutritious foods that greatly complement cereals and tubers.

1.1 Study rationaleLipita and Kanyenda(undated) urges that the utilization of oilseeds data was not fully exploited. Government and other stakeholder consider micro processing as a panacea to marketing of legumes products in that the processed products are high valued than the raw products. One Village One Product (OVOP) and Business Centers and Competitiveness and Job Creation support Projects (CJCSP) are examples of initiatives bent on promoting high valued products. There is seemingly an agro processing drive in the country with easy access to processing machinery now than before. Most organization are also providing grants and loans in support of value addition and agro processing.

While encouraging promotion of legumes and oilseeds processing Lipita and Kanyenda(undated) urges that farmers have an unanswered questions on profitability of the oilseeds, availability of markets for the products, the price and structure of demand for the products. Despite the availability of these initiatives and promotion of micro processing no study has been done to examine the benefits that such microprocessors are generating from micro processing enterprises in the oilseeds sub-sector. This study is thus imperative amidst such agro processing initiatives to explore if agro processing in the oilseeds sub-sector is a viable option.

The African Institute of Corporate Citizenship (AICC) through the legumes platform and as secretariat of the Legumes Development Trust (LDT) is also promoting the development of the oilseeds with agro processing and value addition as key area. This study was therefore undertaken to evaluate micro processing profitability through processing so as to inform areas of intervention so that farmers as rational entities make profits from oilseeds processing. There are few processing initiatives taking place in the sub-sector. It is against this background that the study was commissioned to establish the profitability of the microprocessors and the constraints the microprocessors are facing.

1.2 Study objectives• Analyze the profitability for oilseeds micro-processors.

• Determining the challenges that the oilseeds micro-processors are facing.

• Recommend interventions that would promote oilseed processing.

2.0 METHODOLOGY2.1 Study AreaThe study used purposive sampling to select respondent legumes microprocessors. During the study Blantyre Kasungu, Dowa Mchinji, Mzimba, Ntcheu, Lilongwe, Rumphi, Zomba, were purposively selected for their eminence in oilseeds production. Secondly, groups doing agro processing were targeted. For the purposes of this study, oilseeds were restricted to groundnuts, soyabeans and sunflower. Microprocessors were defined as small-scale farm business organizations or individual farmers practicing legume agro processing.

2.2 Data Collection Techniques

2.2.1 Survey QuestionnaireA well-structured questionnaire was used to collect primary data from microprocessors. The questionnaire covered information on socio-economic and demographic status of households, production levels, fixed and variable production costs, types of processing


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equipment’s, their sources, markets for the processed products, production processes and general management of the farm business organizations.

2.3 Profitability analysis

2.3.1 Techniques for Measuring of ProfitabilityCommon in the definitions profitability is the concept of competitiveness. Competitiveness is a situation in a market in which a num-ber of producers are attempting to increase their own profits. At best, competitiveness is the ability to produce goods and services that meet the demands and expand the real incomes (Yercan, et al., 2009). Measuring profitability of changes in part of the farm often employ the partial budget analysis. The key tool in the partial budget analysis is Gross Margins (Dhuyvetter and Smith, 2005; Mangisoni, 2006).

2.3.2 Gross Margin Analysis

Gross margin analysis is used to find the relative profitability of enterprises. Gross margins are defined as the difference between Gross Income (GI) and Total Variable Costs (TVC) involved in production process. Edriss (2009) used gross margin analysis to find out profitability of groundnuts and other competing cash crops in search for alternatives to tobacco as a foreign exchange earner. Gross margin analysis just gives an indication of whether the business is profitable. A thorough analysis of profitability is done when fixed costs are taken in consideration.

The fact that gross margin analysis does not take fixed costs into consideration remains its caveat. Edriss (2009) points out that gross margin analysis is the first step in deciding the best combination of farm activities. The activity with highest gross margin per resource unit is chosen. Mangisoni (2006) also used gross margin analysis in calculating whole farm budget for irrigation farmers in Mchinji and Blantyre districts. The use of whole farm budget is, however, applicable when the farmer wants to implement major farm changes. Partial budget analysis is employed in instances where change in part of the farm is to be implemented (Dhuyvetter and Smith, 2005).

3.0 RESULTS AND DISCUSSION

3. 1 Descriptive results

As depicted in Table 1 the farm business groups contacted in this study were involved in either groundnuts, sunflower or soybeans processing. A total of 19 groups were reached in the survey.

Table 1: Farmer business organization according to raw materials

Count Cooperative District Groundnuts Soyabeans Sunflower1 Cheka Cooperative Ntchisi ✔

2 Chigomezgo Cooperative Rumphi ✔

3 Chimango Peanut Butter cooperative Rumphi ✔

4 Chinjoka Peanut Butter club Mzimba ✔

5 Chitumbilidi cooperative Mzimba ✔

6 Kasekese cooperative Mchinji ✔

7 Kirk range farmers cooperative Ntcheu ✔

8 Mdunga Kasiya cooperative Kasungu ✔

9 Mkanya cooperative Zomba ✔

10 Mthete agro processors cooperative Dowa ✔

11 Kunthembwe Cooperative Blantyre ✔

12 Talimbika Salima ✔

13 Tayamba agro processors cooperative Mchinji ✔

14 Zuwe Agro processor Cooperative Mzimba ✔

15 Farmers Choice Kasungu ✔

16 Kamwendo cooking oil cooperative Mchinji ✔

17 Mthira Nsembe Mchinji ✔


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18 Bowe Cooperative Kasungu ✔

19 Talimbika Cooperative Salima ✔

3.1.1 Equipment used by microprocessors

About 8% of the microprocessors use mortars. 8% have Shellers with 6% having pressers and 16% of the microprocessors had grinders. About 7% of the microprocessors have mills while 8% have boilers only 8% have steamers. Other machinery include sealer and freezers. As shown in figure 1 below, 5% of the microprocessors have the machine powered by fuel. This includes machines that are driven by generator and indeed all that use fuel such as diesel and petrol. 53% of the microprocessors had their machinery powered by electricity. These have their factory houses connected to ESCOM’s grid. 11% of the microprocessors have their machinery powered by solar energy. 32% of the microprocessors have their machines driven manually (see Figure 1). This category includes those that have mortars and grinders that were operated by peddling.

As depicted in Figure 1, ESCOM power source would negatively affect production levels. By their standards, microprocessors in the study have low capital outlay and need to use sources like solar which are arguably cheaper but only 11% of the microprocessors used it. Microprocessors also be moaned electricity black outs amidst massive load shedding programmes by ESCOM. This means that production would still be constrained by intermittent power availability.

3.1.2 Choice and source of processing equipment

The survey found out that most microprocessors (48%) have their machinery donated to them. The donations in most instances takes the form of loans or grants from promoters of agro processing mostly NGOs and OVOP. The microprocessors therefore have the processing equipment sourced locally (68%) and internationally (32%). Only 26% of the microprocessors have their machinery because it is all they could afford to procure using own capital. Interestingly about 26% of the microprocessors report that the type and choice of their machinery is guided by their processing capacity.

It is a good development to have machinery given to microprocessors in form of grants or loans as this illustrates the support the sub-sector is receiving. On the other hand, when the microprocessors are thought of as business entities and increase in the number of firms having afforded own machinery could be encouraging. It is worth noting that 26% of the microprocessors engage in agro processing because they have more production and resort to processing to either increase market value or enhance marketability of their products. Having microprocessors engaging in agro processing without donor support would paint a good picture in terms of profitability and sustainability of these micro processing enterprises. Some microprocessors have more support from donors which raised few of the enterprises continuity after projects phase out.

3.1.3 Drivers for investment in agro processing

About 67% of microprocessors are lured into agro processing because of they perceive agro processing as profitable relative to sale of raw products. The groups believe that with value addition, prices of the commodities will be high thereby

Most of the microprocessors have manually driven machines. This category included those that had mortars and grinders.

Almost half of microprocessors presently use machinery that was donated to them. A number of the microprocessors bought machinery that they could afford using their own capital. Most of the

microprocessors have machinery because their raw materials necessitate agro processing.


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increase returns. Another reason for engaging into agro processing is the availability of abundant resources which is ranked second (17%). FBOs indicate that the high production experienced in subsequent seasons have influenced them into agro processing as a way of facilitating sale of their products. 16% of the microprocessors are into agro processing because they have learnt from other groups, this includes other microprocessors and individuals who visit or live near them (see Figure 2).

As explained in the above paragraph, over half of the respondents perceive agro processing as profitable venture. This can be attributed to the agro processing drive in the country as championed by government and other stakeholders. However, this profitability should not be perceived but be evidence based. If farmers are trained to do an independent analysis of such enterprises and it is found to be profitable mass processing will be possible and adoption will be easy as it will be evident that the much talked agro processing is not a resultant of project hype. It is also encouraging that 16% of the sampled microprocessors have learnt agro processing from others who supposedly also had to proclaim of the profitability of the enterprises.

3.1.4 Market for processed products

Small-holder farmers in Malawi face obstacle on both production and market sides of their business. Farmers often have difficulty in finding stable markets that will offer fair prices for their crops. To create a conducive environment and improve access to productive resources from all groups of small-holder farmers, the government of Malawi has since 1981 implemented reforms aiming at removing market distortions and improving productivity. Despite this market in Malawi still favor established farmers and traders who are able to fulfill large orders (Alene et al., 2013).

Small-holder farmers resort to selling at reduced prices and to middlemen as they fail to secure markets directly. 41% of the microprocessors sell their products within their communities. Such markets are characterized by low selling prices. An interesting finding among sunflower processors is selling of cooking oil through antennae shops. About 12% of the microprocessors sell their products to members of same cooperative and local fairs.

This finding is most important for microprocessors producing soya milk, with most of the microprocessors found in rural settings the market for milk is not readily available. This result can further be inferred on the consumer preference of soya milk. This calls for conceited strategies for marketing and promoting utilization of soya milk. 47% of microprocessors reported selling to vendors, retailers and regional markets. Sunflower microprocessors also sell to big refining companies and sister cooperatives. Bowe cooperative of Kasungu for instance sell to Kamwendo cooperative of Mchinji district (see Figure 3).

Over half of the microprocessors engage in agro processing because they perceive agro processing as profitable relative to selling of raw products

Most of the microprocessors sell their products within their communities. Some of the microprocessors in the study sell their products to members of same cooperative and local fairs. About half of microprocessors sell to

vendors, retailers and regional markets.


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Much as selling directly to consumers is interesting, the communities are mostly low income earners and implicitly offer low prices to the microprocessors. Selling to these communities together with sale to fellow microprocessors is driven by the fact that most microprocessors have not yet been certified by Malawi Bureau of Standards (MBS). In the case of Bowe cooperative for instance, they sell to Kamwendo Cooperative where the cooking oil is further refined and sold to a wider market as Kamwendo Cooperative is certified by MBS. Initiatives that would help hasten the certification process of these cooperatives would help improve marketability of the processed products.3.1.5 Raw materials

About 6% of the microprocessors produce using own raw materials. 44% of the microprocessors buy the raw materials to supplement what they produce. This finding is important because it augers well with expectations from cooperatives in which they are expected to act as markets in the community to both members and nonmembers. Only 50% of the microprocessors solely depend on buying the raw materials. Microprocessors in the production of soya milk and peanut butter also have further ingredients added to their products which include vanilla, sugar and salt among others.

Overall about 50% source their raw materials from own production. This scenario is worrisome in that often times own production does not match machinery capacity as such machinery lies idle for a good part of the year. Microprocessors can deal away with such seasonality production by buying more raw materials from other producers. To do this, microprocessors may need access to finance in form of grants and loans. Initiatives that can provide warehouses and factories can also go a long way in helping microprocessors bulk raw materials for off season processing.3.1.6 Processed Products

About 47% of the microprocessors produce cooking oil. This comprise sunflower and groundnuts processors. Only 33% of all the groundnuts processors are in cooking oil production. 100% of the sunflower processors are into cooking oil production. 16% of microprocessors are in peanut butter production. Only 5% of the microprocessors are in production of groundnut flour. As about 32% of the microprocessors use soybeans as raw materials, it is surprising that none is in cooking oil production.

Soya milk is a dominant product. Most of the groups in soya milk production have machinery donated to them by Non-Government Organizations (NGOs) with Development Aid from People to People (DAPP) topping the list of promoters of soya milk production. Production of soya milk is reportedly kept low by the groups as they do not have complementing storage equipment such as fridges. About 11% of the microprocessors are producing Peanut butter. Groundnuts flour trailed in this list at 5 %( see Figure 5).

About 11% of the microprocessors reported production of soybean and groundnut cakes as by product of their processing activities. It was surprising, however, to note that these by-products were not treated as worthy selling and that in most case they were given freely to group members. In Mthethe Cooperative, for example, the soya cake was said to be taken freely by cooperative members and who used it to feed their individual livestock. This presents a missed opportunity by most groupings. Economically, these by-

Most of microprocessors are involved in buying the raw materials on top of own production. Only half of the microprocessors solely rely on buying the raw materials.

Most microprocessors are producing cooking oil. This comprises sunflower and groundnuts processor. Most of the soya microprocessors are in soya milk production.


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products are equally important and can help increase profit margins if sold. In cases where cooperatives cannot sale the by-products they may introduce complementary enterprises which can take these byproducts, for example piggery can utilize soy cakes as the farmers take advantage of profits from piggery to buy more raw materials.

Production of soya milk among soya microprocessors is seemingly a result of machinery made available to farmers through donor support. All the microprocessors in the soya category had similar machinery and producing similar product. It was evident that these microprocessors are constrained and lack choice as their machines could only produce milk which is also not widely preferred hence low sales.

3.1.7 Production processes

Figure 6 shows the production processes under taken by the microprocessors. Almost all the cooperatives are involved in grading. Crushing is done by almost all the groups. All the microprocessors are involved in grading. The legumes are graded according to size and removing all debris and shriveled seeds. It is worth noting that most of these activities are done manually.

Since most of these processes are done manually, production levels remains a challenge. It is difficult to achieve high production with manual production. Much as use of manual labor in doing some of the production processes expresses the desire for microprocessors to engage in agro processing, use of machinery is preferred for mass production and ease to break even.

3.2 Investment and financing decisions

Farm records are important in determining the health of farm business enterprises. Lack of records or incomplete records can misinform enterprise decisions. About 74% of the microprocessors have bank accounts from which they also have bank statements. Only 10% of the microprocessors have invoice books. The microprocessors have a good record of sales as all the microprocessors in the survey area have sales records.

It is surprising that the microprocessors do not have cash flow statements and that about 42% of the microprocessors do not have business plan. Only 16% of microprocessors take time to review their activities through production of profit and loss statements. Almost half of the microprocessors did not rely on break-even analysis to determine prices from the commodities. These microprocessors report that they depend on comparing their prices from other processors and making sure the products are not more than competing products (see Figure 7).

Most of the production processes are done manually making high production difficult to achieve.

A majority of microprocessors do not have accurate financial records.


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Generally, the determining farmers’ revenue tends to be too restrictive and usually based on money income alone over a relatively short period. There also exists likelihood that the highest income groups deliberately understate their income. Beneficiaries are also likely to understate their revenue levels for fear of graduating from the beneficiaries’ list. Likewise rural urban price differentials tend to understate rural real revenues and income (Ghatak, 1986).

Records are very important in determining progress in any enterprise. As depicted in Figure 7, microprocessors do not have complete records. Those that have records do not use them. Most microprocessors for instance do not have cash flow statements and have not utilized their other information to compute profit and loss statements. To avoid the problem of underestimation, trainings in farm records keeping and other economic tools can help microprocessors easily gauge micro processing enterprise profitability.

3. 3 Profitability of oilseeds processing

In order to move from subsistence farming to self-sustaining profit entities or boosted agricultural production, there is need that the generation of income becomes the focus of the farming activities. As explained in section 3.2.3 perceived profitability is one the major pull factors why farmers indulge in agro-processing enterprises. An enterprise that generates more revenues beyond subsistence is likely to be preferred by market oriented firms. Table 2 show a comparison of gross margins for the micro-processors using soya, groundnuts and sunflower as raw materials respectively.

Table 2: Comparison of groundnuts, soybean and sunflower microprocessors

SUMMARYGroups Count Sum Average VarianceSoya 6 218660 36,443.33 5492918307Groundnuts 6 167380 27,896.67 4792778667Sunflower 6 43803765 730,0627.5 1.0285E+14

ANOVA Source of variation SS df MS F P-value F-CritBetween Groups 2.11E+14 2 1.05661E+14 3.08158032 0.0756538 3.68232Within Groups 5.14E+14 15 3.42879E+13 Total 7.26E+14 17

The average gross margin (Mk 730, 0627.50), per sunflower microprocessor shows that sunflower processing is the highest profitable enterprise followed by soya processing (Mk36443.33). Groundnuts processing comes least at Mk 27896.67. Since the calculated F statistic (3.08) is greater tabulated F-statistic (3.68), the null hypothesis accepted and the survey concludes that there is no difference in gross margins of microprocessors using soya beans, groundnuts and sunflower as raw materials.

In absolute values however the margins for sunflower are desirable. This result is quite expected because most of the sunflower microprocessors have readily available customers buying the cooking oil from the community. The prices of cooking oil which averages MK1190.00 is also better than for peanut butter, soya milk and groundnuts flour. The sunflower microprocessors are also selling the by-product, sunflower cake at an average price of MK88/kg. This finding is peculiar to the sunflower microprocessors as the soya microprocessors who have soya milk as the main product do not sell the by-product, soya cake.

Soya processors urge that milk production is limited due to the perishable nature of soya milk and that most cooperatives do not have no freezers to store the milk. The prices for soya milk are also way very low. The average price per liter for soya milk is found to be MK600/liter. On average, 2 kgs of soya bean produced 12 liters of soya milk. The study also found out that the customers for soya milk is limited to communities near the farmer group.

Mthethe cooperative of Dowa for instance reports that owing to the perishable nature of the milk, the cooperative is forced to sell on the day of production and that the cooperative members are forced to buy the milk to avoid wastage. In a nutshell soya milk is still not preferred by a wide market. Products from groundnuts includes groundnuts flour and peanut butter. The market for these products is relatively easy to find as compared to soya beans products. The markets for groundnuts products include agriculture fairs, community and hotels. Chinjoka women peanut butter club for instance indicate that they sell to Luwawa forest lodge and produce on order.

Almost all enterprises generate positive gross margin, an indication that the microprocessors are making profit. There is no difference in gross margin of the three enterprises. Gross margins from

Sunflower are very high in absolute terms, followed by groundnuts and soya in that order.


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3.3.1 Challenges faced by farm business organizations

As summarized in Figure 8, lack of markets is the challenge that most of microprocessors (26%) face. This represents general lack of markets and poor selling prices. Most microprocessors have products that are not certified by Malawi Bureau of Standards (MBS) and the production is still at a small scale to get water. Theft and funds mis-allocation is another challenge faced by 11% of the microprocessors. This finding is in line with White and Crawford (2016) who found out that in urban markets, many legume retailers complain that their legumes are often stolen, even in markets that have hired guards to protect markets overnight.

Similar scenario is reported by Mthethe cooperative that despite having a guard, their products were stolen including parts of machinery. To reduce the likelihood of theft, many retailers haul their legumes back and forth between the market and their homes, a practice that increases expenditures. They are limit quantities they produce to avoid these negative costs.

The FBOs also bemoan lack of machinery for processing; for example Chinjoka women peanut butter club and Chitumbilidi use mortar in processing peanut butter and soya milk respectively. Such traditional implements are laborious and pose limitation on the volumes which the cooperatives can produce. The FBOs also lack capacity building in areas of machinery operation and business management. Other challenges included low capital, persistent electricity outages and high cost of raw materials (see Figure 8).

As explained in the paragraphs above, markets have been a challenge to most microprocessors. The microprocessors generally have no ready markets and often engaging in production with no idea of where to sale. The markets are also characterized by low prices.

4.0 CONCLUSION AND RECOMMENDATIONS

4.1 ConclusionMicroprocessors are small-scale farm business organizations or individual farmers practicing oilseeds agro processing. Sunflower cooking oil, Soya milk and peanut butter are the dominant processed products in the study area. The by-products included sunflower cake and soya cake for sunflower and soya microprocessors respectively. All the enterprises generate positive gross margins, an indication that the microprocessors are making profit.

There is no difference in gross margin of the three enterprises. Gross margins from sunflower are very high in absolute terms, groundnuts and soya followed in that order. The study found out that the microprocessors are characterized by low production levels. The production levels are constrained by the manually operated machines that the soya and groundnuts processors use. In soya milk, production of more milk is limited by lack of storing facilities. The microprocessors also get low prices for the products. In most instances the microprocessors are producing without an idea of where they will sale and often do not sale their by-products.

4.2 Recommendations• Equipment used by microprocessors: there should be deliberate efforts to support provision of processing equipment either

through grants, loans and making importation of processing equipment cheap for the microprocessors

• Choice and source of processing equipment: deliberate efforts should be made to consult the farmers on choice of machinery and that the machines should be locally available

• Drivers for investment in agro processing: efforts supporting production of processed oil seeds should also focus in making markets available

Sunflower cooking oil, Soya milk and peanut butter are the dominant processed products. Gross margins from Sunflower are very high in absolute terms. Microprocessors and that production levels are

constrained by the manual operated machines

Lack of markets is the challenge faced by most of microprocessors. This represents general lack of markets and poor selling prices.


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• Market for processed products: there is need for research to develop new recipes that utilize soya milk so as to spar demand for soya milk.

• Soya bean microprocessors should be encouraged to sale their by- products

• Microprocessors in soya milk production should consider having retail outlets in nearby trading centers to increase their sales as most of the processing is done in rural settings where effective demand is low

• Processed Products: Owing to apparent low demand of soya milk, and that soybean processors only focused on milk production it would be imperative to also consider production of soya cooking oil.

• Develop and promote new recipes that utilize soya milk so as to stimulate demand for soya milk

• Source of raw materials: microprocessors should be supported through credit so that they can also buy raw materials and stock it for processing in lean periods other than depending on own production only.

• Production processes: use of machinery for processing should be supported to encourage mass production and avoid drudgery associated with manual production as is the status currently.

• Investment and financing decisions: Offer capacity building to microprocessors in such areas as in record keeping, gross margin, and market research, costing and pricing skills, and other economic tools so that they take farming as a business.

Cooking oil made from groundnuts


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Yercan, M., and Isikli, E. (2009). Domestic resource cost approach for international competitiveness of Turkish horticultural products. African Journal of Agricultural Research. Vol. 4 (9), pp. 864-869, September 2009. Available on-line at: www.academicjournals.org/journal/AJAR/article-full-text-pdf/6425B7438907 ISSN 1991-637X © 2009 Academic Journals [Accessed on: 15/07/12]


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About AICC The African Institute of Corporate Citizenship (AICC) is a leading non-governmental organisation fostering development through Public Private Partnership Approach in spheres of Agriculture, Governance, Health and Social Protection.

AICC is mainstreaming Corporate Citizenship in number of programs in the agriculture sector with the aim of fostering public private partnerships (PPP) within the sector. The PPP’s model in the agriculture is carried out through the value chain development approach. The aim of these programs is to establish public-private sector platforms that provide commercial and developmental support for sustainable and profitable small-holder agriculture in Malawi. One such programmes is Malawi Agriculture Partnership programme (MAP). Specifically, the MAP program aims to be commercially focused, bringing together relevant stakeholders, both public and private, into specific commodity based partnerships focusing on cotton, rice & legumes and other innovations using the value chain approach. The platforms comprises all stakeholders along value chains starting from farmers, farmer organizations, input suppliers, processors, financial institutions & government ministries and departments.

The legume platform aims at promoting sustainable legume production, processing, value addition and marketing. Legumes are an important component of the agriculture sector in Malawi. It was established after realizing that small individual impacts achieved by different stakeholders could significantly be up-scaled if coordination among actors were improved.

Since, November 2011, AICC through MAP with support from other interested donors/partners such as Irish Aid and Rural Livelihood Economic Enhancement Program (RLEEP) has been working with key stakeholders in the legumes sector in order to collect develop strategies for harnessing opportunities and overcoming key challenges facing the legumes sector. Using a value chain approach, improved coordination of activities is envisaged, as well as to identify constraints and opportunities and to provide workable solutions for problems affecting the sub-sector to make it efficient and viable.

Some of Our Publications

The Chief Executive Officer

African Institute of Corporate Citizenship (AICC)

Taurus House City Centre, Along Convention Drive

P/Bag 382, Lilongwe 3, Malawi

Tel: 265 (0) 775 787/ 691

Fax 265 (0) 775 761

Email: [email protected]

Website: www.aiccafrica.org

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