Irrigated sugar scheme proves a sweet investment for Malawian farmers

In mid-2013, AgDevCo provided a loan of USD0.5 million to the Phata Sugarcane Cooperative, a smallholder farmers’ cooperative in southern Malawi, as part of a project to install a modern irrigation system on 300 hectares of land.

The Coop members are guaranteed a market for their sugarcane at fair prices under a long-term sales contract with Illovo Malawi, a subsidiary of Associated British Foods (ABF). A Malawian farm management services company, Agricane, has been contracted by the Coop to manage the commercial farming operations.

The irrigation scheme includes 10 ha for food crops, allowing farmers to grow maize, beans and vegetables all-year-round. The community is also experimenting with fish farming and rice paddies. Previously farmers in this part of Malawi had to rely on a single, unpredictable rainy season lasting only 3-4 months.

Phata Coop member tending irrigated food crops

AgDevCo is partnering with the Coop to build strong governance and financial management systems; and to help manage the relationships with Illovo and Agricane. There is potential for a second phase expansion of the scheme by a further 450 ha.

A €2.4m grant from the European Union (EU) helped fund the initial construction of the irrigation system. AgDevCo’s loan was used as working capital for the first growing season. The results of the harvest were impressive, with sugarcane yields of 106 tonnes/ha. The Coop believes it can improve productivity by a further 10% next season.

The project provides a reliable and secured income for the Coop’s 378 members. Total revenue in the first year of production was USD1.27m, which returned a net profit to the Coop of $450,000. Profits will be partly reinvested in the Coop’s activities and partly distributed to members.

Chris Isaac, AgDevCo’s Director responsible for Malawi said:

“The impressive early results of this investment show what can be achieved when farmers have irrigation and are linked to markets. Grant funding was needed to kick-start the project, but now the Phata Coop is a commercially-viable business, which we expect to go from strength to strength”.