Agriterra conducted a scoping at Debark in 2012. At that time Debark was slowly recovering from a near full collapse due to mismanagement by its previous leaders. The results of the scoping concluded that it was not recommended to intervene in the process of internal sanitation. The newly appointed leaders should first address the issues from the past and stabilise the union. Now, 2 years later, Debark seems to have regained trust from its members and is showing improvement. Agriterra therefore conducted a company assessment in February 2014 and advised Debark on developing a profitable business case.
Due to the high altitude and weather conditions barley for food consumption is the most grown crop in the area. It is the stable diet for the small-scale farmers, because growing other crops is challenging. During the last 5 years the Ethiopian government has also introduced malt barley for beer production in the area as part of scaling up the Gondar Malt Factory. This malt barley processing plant is now operational since 1 year and has a capacity of 16,2 million kg malt per year, which requires 20 million kg of malt barley as raw material. The initial plan was that the surrounding unions, of which Debark is one, would be responsible for the supply of malt barley to the factory.
The presence of the malt factory creates an interesting business opportunity for Debark. However, over the past year Debark has only managed to supply 500 thousand kg to the factory. Also other unions have failed to deliver the required quantities. As a result the factory is now importing the majority of the required volumes of malt barley from Denmark. The main reason Debark Union is unable to deliver the required quantities is because farmers have low yields due to inappropriate agricultural practices. Another reason is the fact that most farmers use their harvest of malt barley for home consumption as a result of food insecurity in the area.
Debark’s ambition is to strengthen the union by increasing the supply of malt barley to the Gondar Malt Factory. Agriterra will support Debark in its ambition and has developed a cost-sharing action plan for 2014. The main activities are 1) strengthening management and financial control, 2) improving the productivity of the farmers, and 3) implementing a system for provision of alternative food items.
Collecting malt barley for beer brewing purposes sounds controversial in an area of food insecurity. Therefore Debark Union will source substitute commodities (e.g. wheat and teff) from other unions to exchange with farmers that deliver malt barley. In this way producing malt barley becomes a profitable business for the farmers. Currently malt barley sells at €38 per 100 kg, compared to €23 per 100 kg for normal barley. Replacement food crops cost around €26 per 100 kg. Gondar Malt Factory is prepared to provide agronomists that will train the farmers on increasing yield and quality. By producing high yielding malt barley the farmers will earn more, with which they can buy alternative food crops and thus diversify their diets. Since malt barley is a cash crop, the farmers will remain with income for other daily expenses or farm investments.
It will be a challenging business case, because price of imported malt barley is comparable to local produced malt barley. An advantage is that Debark Union has already received a €65.000 loan from Abay bank as working capital to procure the malt barley from the PCs. However, the projected future volumes require more working capital and so there is enough work to do for Agriterra!
