P4P PURCHASE FOR PROGRESS By Laura Melo

2012

BENEFICIARIES: at least 500,000 smallholder farmers - 1 million members of farmers’ organisations engaged in P4P (500,000 in Ethiopia).

DURATION: 5 years (Sept 2008 – Dec 2013)

FUNDING: US$151.8 million for technical capacity for 5 years (food not included)

KEY DONORS: Bill & Melinda Gates Foundation, Howard G. Buffett Foundation, European Union, Governments of Belgium, Canada, France, Ireland, Luxembourg, Netherlands, United States of America and the Kingdom of Saudi Arabia.

21 PILOT COUNTRIES

AFRICA: Burkina Faso, Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Liberia, Malawi, Mali, Mozambique, Rwanda, Sierra Leone, South Sudan, Tanzania, Uganda, Zambia

ASIA: Afghanistan and Laos

LATIN AMERICA: El Salvador, Guatemala, Honduras, Nicaragua

P4P Overview

WFP’s local and regional procurement

WFP Local Procurement – P4P’s foundationPrinciples of acceptable, timely and cost efficient food procurement

VISION OF SUCESS

By 2015, agricultural markets will have developed in such a way that many more small-holder or low income farmers, the majority of whom are women- will produce food surpluses, sell them at a fair price and increase their incomes.

P4P Main objectives

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Leverage WFP’s procurement footprint as a catalyst for growth and connect farmers to markets,

Build the organisation’s capacities and expertise in the area of procurement and market development,

Build a body of best practices in agriculture and market development

Share this knowledge as part of the efforts to strengthen the capacities of countries to reduce hunger.

P4P Development Hypothesis

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Three main pillars

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Demand

Test innovative procurement modalities to foster ability of WFP to work with small holder farmers • E.g. pro-smallholder

competitive tendering, direct and forward contracting,...)

Supply - Partnerships

Through partnerships, ensure quality and reliability of local supply by• Providing technical expertise

in agriculture and market development

• Building capacity• Empowering women

Learning & Sharing

Pilot phase will be monitored closely to learn from experience and identify best practices for later

scale up

Partnerships across the value chain

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P4P Models

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Approach 1:Farmers’ Organisations

and Supply-side Partnerships

Buying from farmers’ organisations

• Receiving support on production and marketing

• various procurement modalities • FO’s at different capacity levels –

high, medium and low • Main challenges – governance,

access to finance, limited availability of infrastructure and equipment to facilitate group marketing, meeting contract requirements

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Common approach in all countries

Approach 2Support to emerging structured

trading systems

Supporting the roll-out of warehouse receipts systems in two ways • direct support for the establishment of the system• Purchasing through the system

Purchasing through commodity exchanges to create a “pull-in/follow-in effect” Working with farmers’ organisations to build their capacities to participate in structured trade

Approach 3Small and

medium traders

Rationale to enhance competitiveness in the market Provide an alternative market for farmers’ surpluses Procurement modality – modified tendering Training provided on WFP procurement and contract requirements Investment in marketing equipment – stitching machines, weighing scales

Approach 4Developing local food processing capacities

Connecting farmers’ organisations to established food processors Developing local processing capacity – biscuits, supplementary feeding products

CountriesCountries

Ethiopia, Malawi,

Tanzania, Uganda and

Zambia

Mozambique and Kenya

Afghanistan, Ethiopia,

Guatemal, Mozambique,

Zambia

Approaches are combined to fit countries needs

Achievements - Procurement

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220,000 metric tons contracted (50,660 mt defaulted) $56 million USD directed to the pockets of smallholders Global default rate - less than 23% (20,000 mt) P4P purchases as a percentage of total local purchases

by WFP in the pilot countries increased from 9% in 2009 to 13% in 2010.

WFP has realized savings of approximately US$ 30 million (savings with respect to import parity price, considering the total quantity contracted

Quantities contracted and Delivered

P4P purchases vs local procurement

Achievements – Training

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855 FOs, with a total membership of over 1 million (352 FOs have signed contracts with WFP)

Over 133,400 smallholder farmers, lead farmers, agricultural technicians, small and medium traders and warehouse operators have participated in training activities organised by WFP and partners

Number of Trainings per Quarter

3 key lessons

Match buying modality to capacity of Farmer organisations

Focus on food safety / quality / processing Link financial service providers to

FOs / strengthen financial literacy

Consistent supply and aggregation Quality assurance Price discovery Cost efficiency Contract performance Elite capture Weak organisational capacity Appropriate Processes and systems

Risks