PROJECT DESCRIPTION
The Government of Malawi sought US$ 15.42 Million financing from the African Development Bank (AfDB) to develop irrigation sugarcane schemes. This was as result of potential in the country’s sugar industry both in terms of available export opportunities resulting from Malawi’s relatively low cost of sugar production and the expanding domestic and regional demand for sugar and sugar products. The successful exploitation of these potentials would enable the country increase the size and reliability of the export earnings, and substitute fuel imports (by ethanol produced as a by-product of cane sugar production). Sugarcane production would increase smallholder (including women) farmers and enhance the Government’s policy goal of alleviating rural poverty.
To this end, the AfDB project developed Liwaladzi 550 ha and Kazilira 780 ha under center pivot irrigation complimented by sprinkler irrigation systems. After successfully implementation of the two AfDB projects, DCGT received a grand from EU 3 Million euros to implement another sugarcane project at Kasitu North 650 ha under the same irrigation systems.
The project promoters are seeking financing to complete the Kasitu project and resuscitate Liwaladzi and Kazilira projects.
The Government of Malawi sought US$ 15.42 Million financing from the African Development Bank (AfDB) to develop irrigation sugarcane schemes. This was as result of potential in the country’s sugar industry both in terms of available export opportunities resulting from Malawi’s relatively low cost of sugar production and the expanding domestic and regional demand for sugar and sugar products. The successful exploitation of these potentials would enable the country increase the size and reliability of the export earnings, and substitute fuel imports (by ethanol produced as a by-product of cane sugar production). Sugarcane production would increase smallholder (including women) farmers and enhance the Government’s policy goal of alleviating rural poverty.
To this end, the AfDB project developed Liwaladzi 550 ha and Kazilira 780 ha under center pivot irrigation complimented by sprinkler irrigation systems. After successfully implementation of the two AfDB projects, DCGT received a grand from EU 3 Million euros to implement another sugarcane project at Kasitu North 650 ha under the same irrigation systems.
The project promoters are seeking financing to complete the Kasitu project and resuscitate Liwaladzi and Kazilira projects.
Project Ownership
The Dwangwa Cane Growers Trust (DCGT) is the executing agency for the projects.
Business Model
The existing model is that DCGT secures funds implements the projects and handled over to management companies. DCGT allows turnkey arrangements whereby the financier implement and manage the project for a foreseeable period until the financier recovers the investment in full.
Objective of the project
The goal is to increase sugarcane production, which will in turn improve foreign exchange position and increase farmer’s income. The project’s specific objective is to alleviate poverty of smallholder sugarcane outgrower farmers (including women) around Dwangwa by increasing their income and improving household food security.
Sector of Operation
Agriculture sector - Sugarcane production
Business Activity
Dwangwa Cane Growers Trust roles among others is to provide a vehicle through which further smallholder cane growing and development can be initiated and progressed further. The business activity requires identification of land, setup development committees, leased the land and securing funding. The implementation is done through engaging contracts with different expertise. DCGT signs license agreements with sugarcane growers which runs for 5 years’ renewable.
Competitive Advantage/gap analysis
The competitive advantages of producing sugarcane in Dwangwa area include: availability of land suitable for sugar cane production in the vicinity of dwangwa sugar corporation milling facility; low cost of production for Malawi cane sugar being lower than that in most competitive producers in the sub region (mainly due to low cost of labour); sucrose extracted rate for cane produced in the Dwangwa area being higher since 1978. Close proximity of two major sugar processing companies (Salima Sugar and Illovo) which provide a readily available market
LOCATION
Actual Location of Project
The project actual location is Dwangwa, Nkhota-kota about 270km north-east of Lilongwe.
Prominent business activity surrounding your place of operation
The project is in close proximity to Illovo Mill, Ethanol Company, Unitrans Company and salima sugar company limited who provide a readily available market. We are also surrounded by all the commercial banks, Malawi revenue Authority, police station and the magistrate court, including hospitals.
BENEFITS OF THE PROJECT/ALIGNMENT OF PROJECT TO GOVT GOALS
Contribution to achieving national, regional or global economic, social, environmental and developmental goals
The project economy will benefit through long term employment, income and food security for the 1070 targeted smallholder sugarcane farmers in Nkhotakaota. The projects will reduce poverty in the project area and improve the standards of living of the beneficiaries. Furthermore, the provision of sanitation facility and portable water will enhance the health of the community where the farmers live. Irrigation will provide vegetation cover almost around the year and help reduce soil and sheet erosion due to heavy rains and strong winds
Export orientation/forex generation
Sugar is Malawi’s third largest agricultural export item after Tobacco and Tea. In 2020, Malawi produced 270,000mt of sugar, with 60% sold domestically and 40% exported. Sugar consumption in South African Development Community (SADC) region last year was forecast above 3.5 million tons and to remain constant for the foreseeable future. The realization of this potential will enable the country to improve its foreign exchange position both through increased sugar export earnings and substitution of ethanol for imported fuel
Import Substitution
The project will increase Malawi’s agriculture earnings through the increased qualities of refined and fortified sugar that will be sold on the domestic and international markets. A by-product of sugar extraction, ethanol, will lead to increase in import substitution for petrol the project of which is in progress.
Value Addition
Several value-added products can be produced by utilization of various crop residues and by-products of sugarcane like bagasse. Sugarcane tops, molasses and vinasse. Ethanol Company Ltd is embarking on project to produce fertilizers from bagasse and molasses.
Actual Location of Project
The project actual location is Dwangwa, Nkhota-kota about 270km north-east of Lilongwe.
Prominent business activity surrounding your place of operation
The project is in close proximity to Illovo Mill, Ethanol Company, Unitrans Company and salima sugar company limited who provide a readily available market. We are also surrounded by all the commercial banks, Malawi revenue Authority, police station and the magistrate court, including hospitals.
BENEFITS OF THE PROJECT/ALIGNMENT OF PROJECT TO GOVT GOALS
Contribution to achieving national, regional or global economic, social, environmental and developmental goals
The project economy will benefit through long term employment, income and food security for the 1070 targeted smallholder sugarcane farmers in Nkhotakaota. The projects will reduce poverty in the project area and improve the standards of living of the beneficiaries. Furthermore, the provision of sanitation facility and portable water will enhance the health of the community where the farmers live. Irrigation will provide vegetation cover almost around the year and help reduce soil and sheet erosion due to heavy rains and strong winds
Export orientation/forex generation
Sugar is Malawi’s third largest agricultural export item after Tobacco and Tea. In 2020, Malawi produced 270,000mt of sugar, with 60% sold domestically and 40% exported. Sugar consumption in South African Development Community (SADC) region last year was forecast above 3.5 million tons and to remain constant for the foreseeable future. The realization of this potential will enable the country to improve its foreign exchange position both through increased sugar export earnings and substitution of ethanol for imported fuel
Import Substitution
The project will increase Malawi’s agriculture earnings through the increased qualities of refined and fortified sugar that will be sold on the domestic and international markets. A by-product of sugar extraction, ethanol, will lead to increase in import substitution for petrol the project of which is in progress.
Value Addition
Several value-added products can be produced by utilization of various crop residues and by-products of sugarcane like bagasse. Sugarcane tops, molasses and vinasse. Ethanol Company Ltd is embarking on project to produce fertilizers from bagasse and molasses.
FINANCIAL REQUIREMENTS
Capital Expenditure Requirement
The total capital requirement to be used to resuscitate the three schemes will not be less than 3 Million US$. This amount shall be used to buy new pumps and finish construction of pump house at Kasitu, buying new pivots and sprinklers, construction of power lines, buying new seed materials, buying field supervisory vehicles, buying fertilizes and herbicides and carrying out selected civil works as the land was already developed. One scheme- Kasitu will be required to be completed, but the two projects Liwaladzi and Kazilira will just need restoration in order to be able to get the maximum production output.
Working Capital Requirement
The actual working capital requirement can be estimated at US$700 thousand for the first year of the project’s implementation.
Proposed Financing Structure
The proposed financing structure for the projects should be inform of a debt. It would be easy to implement the projects and recovery of the debts if turnkey financing arrangement is secured.
PROPOSED INVESTMENT MODEL (ACTIONS REQUIRED/ IMPLEMENTATION ARRANGEMENTS/ CONTRACT TYPE)
The proposed investment model being sought should be a turnkey arrangement which entails the financier provider shall also be the same to implement the projects for agreed period. This arrangement would ensure full recovery of the amount invested. The projects require a financier to provide a long-term loan and this could be combined with PPP Implementation arrangement model. The investor shall be required to provide extension service to the farmers such as fertilizers, Haulage, cutting and maintenance of irrigation infrastructure
PROJECT FEASIBILITY
All studies of the projects including Technical Feasibility, feasibility study, Environment Impact Assessment, Technical Designs, Licenses or market feasibility study were already done by Government.
Financial Feasibility
Net Present Value
Over a period of 5 years, at a rate of return of 5% on investment; the NPV is as follows:
Liwaladzi sugarcane production – US$ 6,993,220, Kazilira Sugarcane production - US$ 7,505,230 and Kasitu North Sugarcane Production - 5,754,357
Payback Period
Kazilira project will be able to pay the initial investment in year one of the projection implementation, whilst, Liwaladzi and Kasitu will be able to payback in year two (about one quarter of the way through year 2). All the three projects as per analysis produce high return on investment and are viable.
CONTACTS
The Executive Secretary, Dwangwa Cane Growers Trust, P O Box 156, DWANGWA.
Tel + 265 999 718 494, + 265 997 950 241. Email: This email address is being protected from spambots. You need JavaScript enabled to view it., This email address is being protected from spambots. You need JavaScript enabled to view it.
The Chairperson, C/O Dwangwa Cane Growers Trust, P O Box 156, DWANGWA.
Tel: + 265 999 950 385, + 265 888 832 712. Email: This email address is being protected from spambots. You need JavaScript enabled to view it.