Livestock production is an important component of the local economy in Sudan, providing food, employment, foreign exchange earnings, a source of wealth, and supply of inputs and services, such as draught power, manure and transport. The livestock subsector however, faces numerous constraints, including a heavy disease burden, low productivity exacerbated by drought and insecurity, the lack of adequate marketing infrastructure, and poorly organized and informed livestock owners and traders (FAO, 2010). The Wad Balal cattle fattening project of IRADA involving an investment of SDG 9.30 million (about USD 1.68 million) aims to make a dent of poverty by addressing many of the above problems. The project aims to produce 7,000 cattle annually meeting export standards, link the poor livestock herders with international markets utilizing contacts of the Sudanese diaspora and increase incomes of an estimated 250 to 300 poor families.
The model of intervention involves three parties â€“ IRADA of BoK; the Wad Balal Company owned by a Â group of Sudanese diaspora in the GCC; and Â the Wad Balal Association with cattle farmers as members. Under the arrangement, IRADA will have a diminishing musharaka agreement with the Wad Balal Company to invest in the required physical assets and create a facility for fattening of the calves. The technical services for the project will be provided by the Company. The Musharaka will provide the facility/assets on lease to the Association comprising the farmers. The lease rentals from the farmers, as received by the Musharaka, will be shared between IRADA and the Company and the latter will buy out the share of the former over a period of 5 years by using a share of its profits. All the cattle post-fattening will be sold by the Association to the Company which will ensure quality standards and export the same to international markets. At another level, IRADA will provide murabaha financing for purchase of calves to the Association. Murabaha bulk financing to reduce cost of purchasing calves. The project by facilitating the production of 7000 export quality cattles every year and, by linking the farmers to the international markets, enhances incomes of 250-300 poor families.
The musharaka between IRADA and Wad Balal Company was formed with 95 percent of capital contributed by the former amounting to SDG 5.04 million and 5 percent by the latter. The musharaka would make direct investments in hangers, electric source, water source, and fattening supportive investment that include cooling storage, services facilities, securities facilities, living allowance of beneficiaries and technical support. The financing tenor is 5 years. The lease of the cattle fattening facility to the association would bring in rentals at 18 percent per annum on Ijarah of assets used for cattle fattening to the association. The Ijarah profits is shared between Wad Balal Company and BoK as per the agreed terms of diminishing musharaka.
The murabaha financing amounting to SDG 4.26 million will involve murabaha to purchase calves for Wad Balal Association at 15 percent profit margin. BoK will provide 100 percent financing for calves in the first 2 years; which will gradually reduce to 25 percent in the fifth year.
Arrows denote specific activities as follows:
- Diminishing Musharaka Agreement between BoK and Wad Balal Company (WBC) to create Fattening Facility
- Bok helps farmers form Wad Balal Association (WBA)
- Murabaha agreement between BoK and farmers represented by WBA to finance purchase of calves
- Ijara agreement between Musharaka and WBA to use Facility in lieu of payment of rentals
- Use of fattening facility by farmers to make the calves grow
- Technical consultancy and training by WBC
- Delivery of cattle by farmers to WBC
- Sale of cattle by WBC in overseas markets
As before, this initiative also involves a provision of a multitude of non-financing intervention/ services that include the following:
- Detailed feasibility study
- Technical support throughout project lifetime to ensure production quality and cattle vet services
- Establish linkage with Wad Balal Company with access to market in GCC countries
- Assistance in managing the project accounts
- Formation of Wad Balal Association of farmers
An agri-based project like Wad Balal faces several risk factors, many of whom related the marketability of the cattle that are reared by the farmers. The success of the project hinges on mitigating these risks to acceptable minimum. Below we list down some major risk factors identified by BoK and the various measures contemplated to address them.
- Diseases: The project provides on-site veterinarian services to treat and prevent cattle diseases.
- Lack of quality and specifications (e.g. health, weight) for export market: On-site technical services are provided to educate farmers how to raise the quality of their livestock and meet international standards.
- Unmet basic needs of farmers: Families are provided living allowance.
- Inability to market: The Wad Balal Company which has strong export links with the GCC countries have committed to purchase the cattle at a fair price.
- Lack of commitment by farmers: This risk is mitigated considerably by retaining the right with BoK to remove a shirking beneficiary and replace with another committed worker. This is backed by stringent performance monitoring. Good perfomance is also incentivized with BoK having the right to distribute a larger proportion of profits based on performance and commitment. Performance of individual farmers is also monitored at the Association level.
Plan of Action for North Sudan: Emergency response and rehabilitation for food and agricultureÂ (2010-1012), FAOÂ accessed
Mohammed Obaidullah | October 11, 2014