longitudinal impact assessment study of sugar producers in malawi

LONGITUDINAL IMPACT ASSESSMENT STUDY OF
SUGAR PRODUCERS IN MALAWI
Commissioned by the Fairtrade Foundation
Barry Pound and Alex Phiri
Natural Resources Institute,
University of Greenwich
January 2010

Acknowledgements
We would like to thank the Kasinthula Cane Growers Ltd management and staff for
their hospitality and forbearance during this study. (Fairtrade clerical staff in
particular were extremely helpful with information and guidance. In addition, lllovo
Management staff at Nchalo Estate helped us to understand the relationship between
Kasinthula and Illovo. TWIN/TWIN Trading representatives provided useful
information on their support to Kasinthula, while Nita Pillai and Jessica Gordon were
a constant encouragement throughout the study.
Disclaimer
The opinions expressed in this report are those of the authors, and do not
necessarily represent the views of the parties with whom we interacted - nor do they
represent the views of the Fairtrade Foundation.
2

Executive Summary
The study
This study was commissioned by the Fairtrade Foundation and conducted by the
Natural Resources Institute in 2009-10. It reflects the increasing demand to measure
and demonstrate the difference that engagement with Fairtrade has had on
participating producers and workers, their families, the Producer Organisations (PO),
and the wider community in developing countries – in other words the impact of
Fairtrade.
The overall objectives of this sugar impact assessment study in Malawi were to:
Understand the context and environment in which Fairtrade in the Malawian
sugar industry is operating
Understand the aims and objectives of the PO in terms of their sustainable
development and empowerment,
Assess the extent to which Fairtrade as well as other organisations or
networks, have assisted the PO in achieving its objectives
Compile baseline information against which to monitor progress and impact in
the future
The initial study will be followed up after 2 and 4 years to provide a longitudinal
assessment of:
The longer-term impact, both positive and negative, that being part of
Fairtrade has had on producers, their organisations and the wider community
The longer-term impact that Fairtrade has had on the local economy
How Fairtrade organisations can support producers more effectively to
achieve their goals in the future
The approach used is a participatory livelihoods approach and the process had 4
components:
A review of relevant information;
Discussion with a range of stakeholders at national, district and local levels;
Meetings with the Producer Organisation; Focus Group Discussions with men
and women members, and with non-cane producing farmers; Case-study
semi-structured interviews with individual member families, and production,
income and membership data requested from relevant organisations;
A feedback meeting with KCGL staff and producers, Illovo Sugar (Malawi) Ltd
staff and members of the EU project for the expansion of Kasinthula Cane
Growers Ltd (KCGL).
The sugar sector
Malawi’s sugar sector is vital for the country’s economy and holds enormous
potential. It is the country’s third most important export commodity, valued at US$ 61
million (2007). Malawi is one of the most efficient sugar producers in the world,
producing sugar up to three times cheaper than European producers. The sugar
cane is grown under irrigation, and agro-climatic conditions are favourable for both
cane yields and sugar formation. The Fairtrade certification in 2004 of the first and
only Fairtrade sugar producer group in Malawi, Kasinthula Cane Growers Limited
(KCGL), plus the tariff free access into Europe, means that Malawian Fairtrade sugar
is now available in mainstream supermarkets.
Illovo Sugar (Malawi) Ltd is Malawi’s only sugar plantation producer and processor. It
has two estates with milling facilities at Nchalo Estate on the Shire River (which mills
the cane from Kasinthula), and Dwangwa Estate near Lake Malawi. Together with
3

local smallholder production that they purchase, they produce around 270,000
tonnes of sugar per year (5% of production at Nchalo is from bought-in Kasinthula
smallholder production).
Kasinthula Cane Growers Limited produced 69,831 tonnes of sugar cane in 2009
from 754 hectares of land. KCGL has 282 farming families and 460 permanent
workers. All of that production is purchased by Illovo and processed at its Nchalo
factory. There are around 50 buyers of the sugar produced, with 28% going to
Europe, 67% used for the domestic market and speciality sugars being sold to
Europe and the USA.
The socio-economic situation
The main crops grown in the Kasinthula area are rice, cotton, maize (the main food
security crop), sorghum, millet and sesame. The average land holding in the area is 1
ha of mostly rainfed land (compared to 2.5 or 3 ha of irrigated cane land allocated
to KCGL members). Cotton is the main cash crop for the majority of farmers in the
area who are not members of KCGL. However, sugarcane is the main source of
income for KCGL members. This secure and significant income is supplemented by
the sale of crop and livestock products. There is also reduced household expenditure
on bought-in food because members have access to irrigated land to grow their crop
staples. The area experiences poor rainfall and anecdotal evidence from farmers
suggests that this is getting worse over time. Soil fertility is also declining partly due
to heavy deforestation.
The farmers and labourers for KCGL are drawn from 13 villages around Kasinthula,
which is itself situated at some 25 km from the Illovo Nchalo sugar factory. There are
5 primary schools and 3 Secondary Schools in the area. There is only one clinic in
the area (TA Katunga) dealing mainly with bilharzia, the under-fives and cholera
cases. Food security is generally poor among non-KCGL families in this area; about
85 percent of households run out of food by December. In contrast most KCGL
members have enough food all year round due to relatively high incomes from
sugarcane and producing more than one crop of maize in a year under irrigation on
the 30ha of KCGL land not allocated to sugar which is available to members.
Findings and conclusions
The positive impacts of Fairtrade since certification in 2004 have been:
• The amount of Fairtrade Premium has been increasing year on year and
substantial sums of money have been well managed
• Individual KCGL members have benefitted from the 40% farmers livelihoods
component of the Fairtrade Premium. This has assisted significant
diversification of incomes into small businesses, cattle ownership and crop
cultivation
• Individual producers and labourers are benefitting from separate revolving
funds that enable them to access credit
• KCGL as a whole is benefitting from the 30% of Fairtrade Premium allocated
to ploughout and renewal of cane fields that should lead to improved yields
and therefore improved profitability
• Communities, including non-members, are benefitting from the 30%
community development and environmental uses of Fairtrade Premium
• Company and Trust officials have received numerous trainings and attended
Fairtrade events outside the country
• There are functioning democratic structures in place (Committees, General
Assemblies and the start of a Workers Union)
4

• Food security for producer households is good and living conditions (housing,
services, household durables) are improving due to the good levels of income
and use of Fairtrade Premium
A negative impact that could be attributable to Fairtrade is that the high proportion
(40%) of Fairtrade Premium going directly to members as an in-kind contribution to
their livelihoods creates dependency. It is hoped that as the Company becomes more
profitable, this will be replaced by Company dividends.
A number of concerns that are not attributable to Fairtrade, but affect the mediumterm
prospects of KCGL are:
• A combination of management failures and free-riding by farmers has led to
the situation where field husbandry declined in previous years leading to low
yields and consequent low profits. Yields need to be brought up from the
present 94t/ha to over 100t/ha. This is being tackled vigorously by new
KCGL Management and staff. However, mechanisms to overcome the freeriding
of farmers (who get an equal share of advances and Fairtrade
Premium) are still to be instituted;
• The large debts borne by KCGL have created a situation where it is
impossible for the company to make a profit. Revenues from cane sold to
Illovo do not cover the repayments. In order to become a profitable company,
yields of cane need to rise towards those attained on the Illovo plantation
(through ploughout, better weeding, better irrigation and use of fertiliser),
labour use needs to be further reduced (by farmers taking greater
responsibility for field operations), dis-incentives need to be removed that
lead to free-riding farmers (at present all farmers receive the same advance
and in-kind payments), the area under cane needs to be expanded to benefit
from economies of scale (this is being addressed through Phase III), and the
debt situation needs to be reduced as far as possible (through pressure on
Illovo);
• The number of labourers employed on a permanent basis is cause for
concern. Although the situation has improved, the ratio was still 460 labourers
to 282 farmers in March 2010. These permanent labourers do not receive a
fair share of the benefits of Fairtrade. A disproportionate share goes to the
282 farmers.
• There are only 282 farming households in the KCGL at present, out of the
catchment area of 13 villages. This has inevitably led to inequality of incomes
and food security between those in and those outside the KCGL member
families. This is only partly mitigated by community development projects
under the Fairtrade Premium.
The omens that bode well for the future of KCGL are that:
• The EU project is developing a KCGL Phase III, and putting significant
amounts into capacity development for farmers and the Boards and
Committees that run KCGL
• The situation of the labourers engaged on KCGL activities seems to be
improving, with a realisation that they should get a larger share of the benefits
(from the sale of sugar and from the Fairtrade Premium)
• Relations between KCGL and Illovo Sugar (Malawi) are in general good, with
healthy interdependence and cooperation
• Relations between farmers and KCGL management are also improving after
a difficult period
5

Acronyms
ACP African, Caribbean and Pacific Group of States
AFN African Fairtrade Network
ATO Alternative Trading Organisation
BoD Board of Directors
COFTA Cooperation for Fair Trade in Africa
DFID Department for International Development
EU European Union
FF Fairtrade Foundation
FGD Focus Group Discussion
FLO Fairtrade Labelling Organisation International
FOB Free On Board
FT Fairtrade
FTO Fairtrade Trading Organisation
FTO Fair Trade Original
GDP Gross Domestic Product
GoM Government of Malawi
Ha Hectare
ISO International Sugar Organisation
KCGL Kasinthula Cane Growers Limited
LI Labelling Initiatives
M&E Monitoring and Evaluation
MK Malawi Kwacha
MSB Malawi Savings Bank
MT Metric Tonne
NGO Non-Governmental Organisation
NRI Natural Resources Institute
NRM Natural Resource Management
PO Producer Organisation
PPP Producer Partnership Programme
QMS Quality Management System
SADC Southern Africa Development Community
SSI Semi-Structured Interview
SVCGT Shire Valley Cane Growers Trust
TA Traditional Authority
TT Twin Trading
TWIN The charity that owns Twin Trading (Third-World Information
Network)
USA United States of America
6

Contents
1. Introduction
Page
8
2. Objectives 8
3. Methodology 9
4. The global, national and local contexts 10
4.1 The global sugar situation 10
4.2 The sugar situation in Malawi 11
5. The socio-economic situation in Malawi 14
6. Support to KCGL from TWIN/TWIN Trading 15
7. Findings of the study 17
7.1 The producer and processing organisations
17
7.2 The process of certification 24
7.3 Production achievements and challenges 24
8. Impact areas 26
8.1 Changes in social structure 26
8.2 Changes in the socio-economic situation of participating
producers and their households including their income, working
conditions, living conditions and access to basic services
26
8.2.1 Socio-economic impact data from David Phillips study
in 2007/8
30
8.3 Case studies of KCGL members and non-member families 31
8.4 Changes in the organisation of rural areas / workers’
organisations
39
8.5 Changes in local, regional and national development 46
8.6 Changes in the management of natural resources 47
9. Improving impact 48
9.1Producer standards 48
9.2 Trade Standards 49
9.3 Organisational support and business development 49
9.4 Networking 50
10. Key indicators to be monitored over time 51
11. Conclusions and recommendations 53
7

1. Introduction
This study reflects the increasing demand to measure and demonstrate the
difference that engagement with Fairtrade has had on participating producers and
workers, their families, the Producer Organisations (PO), and the wider community in
developing countries – in other words the impact of Fairtrade.
This demand comes from a variety of stakeholders including consumers, the media,
political authorities, funding donors and supply chain actors (licensees and retailers)
who have a legitimate interest in learning whether the Fairtrade labelling system is
meeting its aims and objectives and improving the situation of smallholder producers
and plantation workers.
There is also a need to promote ongoing learning and accountability amongst the
organisations involved in Fairtrade – the PO, Fairtrade Foundation (FF) and other
Labelling Initiatives (LI), Fairtrade Labelling Organisations (FLO), Fair Trade
Organisations, (FTOs), commercial actors and Non-Governmental Organisations
(NGOs) - about the effectiveness of the tools and processes used to achieve the
objectives of Fairtrade labelling. This enables the PO itself to learn on a continuous
basis about its progress towards its stated objectives and how participation in
Fairtrade is facilitating this. It also provides a useful and systematic way for POs to
work in partnership with the Foundation and feed systematically into the Fairtrade
labelling system their perspective of what is going right and wrong and why, and to
ensure that lessons are learnt and positive change is effected.
2. Objectives of the study
The overall objectives of this sugar impact assessment study were to:
Understand the context and environment in which Fairtrade in the Malawian
sugar industry is operating
Understand the aims and objectives of the PO in terms of their sustainable
development and empowerment,
Assess the extent to which Fairtrade as well as other organisations or
networks, have assisted the PO in achieving its objectives
Compile baseline information against which to monitor progress and impact in
the future
The initial study will be followed up after 2 and 4 years (i.e. in 2011 and 2013) to
provide a longitudinal assessment of:
The longer-term impact, both positive and negative, that being part of
Fairtrade has had on producers, their organisations and the wider community
The longer-term impact that Fairtrade has had on the local economy
How Fairtrade organisations (especially FF and FLO) can support producers
more effectively to achieve their goals in the future
8

3. Methodology
This study is a longitudinal impact assessment of Fairtrade sugar in Malawi, with
specific reference to a single FLO-certified sugar producing organisation (Kasinthula
Cane Growers Ltd) and a single sugar processor/exporter (Illovo Sugar (Malawi) Ltd).
This report presents the findings of the first of three visits, the others being scheduled
for 2011 and 2013. The study was conducted by the Natural Resources Institute
(NRI) over a 4-week period between November 2009 and January 2010, with over
two weeks being spent in field work. NRI is independent of the Fairtrade Foundation
which commissioned the study.
The approach used is a participatory livelihoods approach in which the Producer
Organisation, their members, their families, their communities and the stakeholders
who influence or interact with them are studied across organisational, economic,
social, political, institutional and technical dimensions.
The process used had 4 components:
1) A review of relevant information;
2) Discussion with a range of stakeholders at national, district and local levels to
understand the different perspectives of the organisations that shape the context of
the sugar industry in Malawi.
3) a) Meetings with the Producer Organisation; b) Focus Group Discussions (FGD)
with men and women members, and with non-cane producing farmers in the same
localities; c) Case-study semi-structured interviews (SSI) with individual member
families, and d) Production, income and membership data requested from relevant
organisations. Tools used during the meetings with the PO staff included Stakeholder
Analysis to map and understand the influence and activities of main stakeholders,
Value Chain Analysis, and Force Field Analysis to understand where the
organisations are now and where they hope to be in four years time.
4) A feedback meeting in January 2010 together with KCGL staff and producers,
Illovo Sugar (Malawi) Ltd staff and members of the EU project for the expansion of
Kasinthula Cane Growers Ltd, in which the results of the survey were presented,
discussed and corrected – and the next steps explained.
The study aimed to capture impact information in the following areas:
1. Changes in social structure
2. Changes in the socio-economic situation of participating producers/workers and
their households including their income, working conditions, living conditions and
access to basic services
3. Changes in the organisation of rural areas / workers’ organisations / trade unions
4. Changes in local, regional and national development
5. Changes in the management of natural resources
Gender perspectives were specifically addressed through the inclusion of both men
and women members in FGDs and case studies, while diversity was addressed by
designing the sample of Phases, villages and case studies to cut across ecological
and socio-economic conditions. Triangulation was assured by the range of
stakeholders consulted, and the different levels of the Producer Organisations
surveyed.
In Section 10, simple and measureable indicators are identified that can be used
to monitor the progress of economic, social, environmental and organisational
impacts attributable to Fairtrade certification and the use of the Fairtrade Premium.
9

4. The global, national and local sugar contexts
4.1 The global sugar situation
More than 100 countries produce sugar, 80% of which is made from sugar cane
grown primarily in the tropical and sub-tropical zones of the southern hemisphere,
and the balance from sugar beet which is grown mainly in the temperate zones of the
northern hemisphere. Generally, the costs of producing sugar from sugar cane are
lower than those in respect of processing sugar beets.
Currently, 70% of the world's sugar is consumed in the countries of origin, whilst the
balance is traded on world markets. Because of the residual nature of the world
market, the free market price has historically been one of the most volatile of all
commodity prices. The five largest exporters in 2008/09, Brazil, Thailand, Australia,
SADC and Guatemala, are expected to supply approximately 85% of all world free
market exports. South Africa is currently ranked as the 8th largest exporter to the
world market. None of the other countries in which Illovo operates export sugar to the
world market.
The world sugar price, although continuing to be very volatile, adjusted upwards
during the past two years, from an average of US11.84 cents/lb in April 2008 to
above US13.00 cents/lb in March 2009 and US 15.20cents/lb in April 2010.
The world sugar balance forecast for the period October 2009 to September 2010
shows a widening gap between world consumption and global output. World
production is now put at 157 million tonnes, raw value, up by 3% from the last
season. Generally sugar crops in the world’s leading producing countries – with the
exception of the EU, Russia, and, probably, India – are now likely to be lower than
expectations at the beginning of the season. World consumption is expected to grow
at a rate significantly lower than the long-term 10 year average (1.48% and 2.66%,
respectively). The lower growth is attributed to soaring world market prices as well as
some lingering impacts of the 2008/09 global recession on sugar consumption
growth rates. The ISO does not anticipate that the projected renewed global
economic growth will significantly stimulate sugar consumption in the course of
2009/10, particularly taking into account high world market prices. Even so, global
use of sugar is expected to reach 166.6 million tonnes. Growth in global production is
too small to cover anticipated increases in sugar consumption, and the world
statistical deficit is expected to reach 9.4 million tonnes by September 2010.
Figure 4.1 World Sugar Balance
2009/10 2008/09 Change
(mln tonne, raw value) in mln t in %
Production 157.160 152.482 4.678 3.07
Consumption 166.585 164.153 2.432 1.48
Surplus / Deficit -9.425 -11.671
Import demand 54.281 50.068 4.213 8.41
Export availability 52.156 50.070 2.086 4.17
End Stocks 53.068 60.368 -7.300 -12.09
Stocks/Consumption ratio in% 31.86 36.78
Source: ISO quarterly market outlook, February 2010
10

4.2 The sugar situation in Malawi
Although sugar is more costly to produce in Europe than in developing countries,
government subsidies coupled with high production quotas have lead to
overproduction which has subsequently depressed the global sugar prices 1 . High
import taxes and strict quotas have been additional barriers for even the most
efficient developing country producers trying to seek markets for their own exports.
Malawi’s sugar sector is vital for the country’s economy and holds enormous
potential. It is the country’s third most important export commodity after tobacco and
tea, valued at US$ 61 million (2007). Malawi is one of the most efficient sugar
producers in the world, producing sugar up to three times cheaper than European
producers. The sugar cane is grown under irrigation, and agro-climatic conditions are
favourable for both cane yields and sugar formation. As an ACP 2 country, Malawi has
been able to export 20,000 metric tonnes of sugar to the EU through a preferential
KCGL arrangement. The Fairtrade certification in 2004 of the first and only Fairtrade
sugar producer group in Malawi, Kasinthula Cane Growers (KCGL), plus the tariff
free access into Europe, means that Malawian Fairtrade sugar is now available in
mainstream supermarkets.
From 2009, under the terms of the “Everything But Arms” (EBA) initiative which is
part of the recent EU sugar regime reforms, Malawi’s status as a Least Developed
Country (LDC) will grant it unrestricted duty-free access to the EU for all its sugar,
giving the country – and potential Fairtrade sales – some long-term support and
market access. However as Brazil – the world’s largest and most efficient sugar
producer – steps in to provide the shortfall in sugar left by the EU, land-locked
developing countries like Malawi will still struggle to compete due to their higher
export costs.
Illovo Sugar (Malawi) Ltd is Malawi’s only sugar plantation producer and processor. It
has two estates with milling facilities at Nchalo Estate on the Shire River (which mills
the cane from Kasinthula), and Dwangwa Estate near Lake Malawi. Together with
local smallholder production that they purchase, they produce around 270,000
tonnes of sugar per year (5% of production at Nchalo is from bought-in Kasinthula
smallholder production).
Kasinthula Cane Growers Limited produced 69,831 tonnes of sugar cane in 2009
from 754 hectares of land. KCGL has 282 farming families and 460 permanent
workers. All of that production is purchased by Illovo and processed at its Nchalo
factory. There are around 50 buyers of the sugar produced, with 28% going to
Europe, 67% used for the domestic market and speciality sugars being sold to
Europe and the USA. The Figure below (from TWIN) shows the supply chain for
Kasinthula sugar.
1 Since 1995 the EU has spent around $1.25bn a year subsidising sugar exports. Subsidised exports are
estimated to depress world sugar prices by 12%.
2 The African, Caribbean and Pacific Group of States (ACP) is an organisation created by the
Georgetown Agreement in 1975. It is composed of African, Caribbean and Pacific States signatories to
the Georgetown Agreement or the Partnership Agreement between the ACP and the European Union,
officially called the "ACP-EC Partnership Agreement" or the "Cotonou Agreement".The ACP Group´s
main objectives are: a) sustainable development of its Member-States and their gradual integration into
the global economy, which entails making poverty reduction a matter of priority and establishing a
new, fairer, and more equitable world order ; b) coordination of the activities of the ACP Group in the
framework of the implementation of ACP-EC Partnership Agreements; c) consolidation of unity and
solidarity among ACP States, as well as understanding among their peoples ; d) establishment and
consolidation of peace and stability in a free and democratic society.
11

The Trading Chain
Farmers grow sugarcane
Shire Valley Cane Grower’s Trust
Kasinthula Cane Growers Ltd
Nchalo Estate
Illovo (Malawi) Ltd
Includes licensees in the UK,
Europe and USA
Include British, French &
German brands and
Supermarket “own labels”
Diagram courtesy of , TWIN, Malawi
Farmer organisation
Refinery
Marketing
and exporting
Importers
Brands
(manufacture, marketing)
Retailer
(Supermarkets, shops, hotels,
restaurants, workplaces)
Consumers buy sugar
12
Fairtrade
Labelling
Organisations
International (FLO)
FLO Standards sets the
global standards of
Fairtrade, in consultation
with Fairtrade stakeholders.
It authorises the use of the
Fairtrade label (above) on
Fairtrade-certified products.
FLO-Cert inspects and
certifies the whole trading
chain. The questions FLO-
Cert is trying to answer are:
Is everything in the
chain according to the
standards?
Are the producers
really benefiting from
Fairtrade?
FLO-Cert ensures fairness,
transparency and
democracy according to the
standards. It guarantees to
the consumer that her/his
decision to buy a labelled
Fairtrade product will help
the farmers who produced it.
Fairtrade standards require
the buyer to pay a premium
for social and economic
development, as well as
providing other benefits to
the producer organisation,
such as export finance.
FLO also has standards for
hired labour and the
environment.

Malawi exported sugar during the year to a number of regional markets in Africa,
where selling prices are related to the world market price. In all instances, premiums
above the world price were achieved as a result of various competitive advantages.
Demand was strong and prices benefited from higher average world market prices in
2008/09.
The Illovo group also exports furfural, furfuryl alcohol, diacetyl, 2.3-pentanedione,
ethyl alcohol and lactulose to 81 countries. In addition, BioMass Sugar, a liquid
organic fertiliser derived from sugar cane is being sold to a growing number of
international markets.
In late 2006, Illovo Sugar was acquired by a British multinational food company , and
a major expansion in both estate and out-grower production is planned in order to
capitalize on the opportunities provided by the lifting of quotas in 2009.
Illovo is FLO certified as a processor/exporter. As such, Illovo does not handle any
money for Kasinthula. All the revenue including the Fairtrade Premium is directly sent
from the buyer into Kasinthula’s bank account.
Separating the Kasinthula sugar from that of Illovo is technically impossible as it is all
processed together. This was discussed with FLO-CERT and the certification was
given based on this understanding. There is a clear formula that is used to estimate
the amount of sugar exported from the cane supplied by Kasinthula and the
appropriate price and Fairtrade Premium are then paid. Additionally, there is no
major difference in quality of sugar cane produced by the two parties.
13

5. The socio-economic situation in the Kasinthula area
The main crops grown in the Kasinthula area are rice, cotton, maize (the main food
security crop), sorghum, millet and sesame. The average land holding in the area is 1
ha of mostly rainfed land (compared to 2.5 or 3 ha of irrigated cane land allocated
to KCGL members). Cotton is the main cash crop for the majority of farmers in the
area who are not members of KCGL. However, sugarcane is the main source of
income for KCGL members. This secure and significant income (compared to other
income sources in the area – see Tables 8.1, 8.2 and 8.3) is supplemented by the
sale of crop and livestock products (see case studies below). There is also reduced
household expenditure on bought-in food because members have access to irrigated
land to grow their crop staples. Compared to non-members, KCGL families are welloff,
as can be seen by the upgrading of their houses and the accounts given in the
case studies below (and in Annex 3 – separate volume).
The area experiences poor rainfall and anecdotal evidence from farmers suggests
that this is getting worse over time. No formal evidence of this was collected. Soil
fertility is also declining partly due to heavy deforestation. In response to this, there is
the establishment of nurseries and the replanting of trees with technical support from
, an International development NGO, and financial support through the Fairtrade
Premium.
The farmers and labourers for KCGL are drawn from 13 villages around Kasinthula,
which is itself situated at some 25 km from the Illovo Nchalo sugar factory. Most of
these are in Traditional Authority Katunga, with two in Traditional Authority Maseya.
There are 5 primary schools and 3 Secondary Schools in the area (1 in TA Maseya
and 2 Private Schools in TA Katunga). There is only one clinic in the area (TA
Katunga) dealing mainly with bilharzia, the under fives and cholera cases.
Food security is generally poor among non-KCGL families in this area; about 85
percent of households run out of food by December. In contrast most KCGL
members have enough food all year round due to relatively high incomes from
sugarcane and producing more than one crop of maize in a year under irrigation on
the 30ha of KCGL land not allocated to sugar which is available to members.
14

6. Support to KCGL from TWIN/TWIN Trading
TWIN/TWIN Trading 3 first made contact with Kasinthula in 2003, when a UK
Fairtrade Chocolate company was looking for an African source of Fairtrade sugar.
At that time the work was funded from the company’s Producer Support Programme
( It invests 2% of turnover in a producer support programme that supports farmers’
democratic organisation and helps them build their business). TWIN developed a
consistent Producer Partnership Programme with KCGL from 2006-7 using combined
funding from the chocolate company and a major UK charity (the QMS project).
TWIN traded sugar from Kasinthula until 2008 4 , when the increased demand for
Fairtrade sugar meant that it was difficult to trade small quantities. Although TWIN
prefer to both trade and build capacity at the same time, it decided to continue its
relationship with Kasinthula.
In 2006/7 TWIN received a grant from a major UK charity to work with 13
organisations across Africa, including Kasinthula. This was combined with funding
from a Dutch NGO who also source sugar from Kasinthula. They have recently
carried out an impact study of KCGL, but the findings were not available in time for
inclusion in this report.
The TWIN Producer Partnership Programme has been trying to understand the
supply chain challenges and their solutions in order to improve their business
situation. First TWIN had to understand the complex situation (in particular the status
and implications of the set of loans being borne by KCGL, and the trading
relationship with Illovo), and then to get the KCGL/SVCGT to understand and be able
to do something about the various disadvantages they are having to battle against in
order to make a profit on their sugar production. This was done through a course on
“Understanding Kasinthula’s Business” with the two Boards (KCGL and SVCGT) and
the various committees.
In addition, TWIN would like to bring their Quality Management System up to ISO-
9001 standards, and there has been training, retraining and coaching of middle and
senior management in QMS principles. However, QMS is of secondary importance
while the major challenges of debt and the unequal trading relationship with Illovo
remain unresolved. Emphasis has also been put on Fairtade certification compliance
and on managing the considerable Fairtrade Premium income – in particular working
with the Premium Committee. There has also been some input into the development
of the TORs’ for the EU capacity building project.
There is an annual assessment of these challenges, and also of the things that have
gone well in the past year. An in-country TWIN representative, , manages this
process. Recently a new financial management system has been introduced,
together with the installation of a new accounting package. TWIN is following the
business progress of Kasinthula using a set of 17 indicators, which it will shortly
reduce to 7/8 to make the monitoring system easier and cheaper to manage. The
present indicators are shown in Table 6.1. These are available from 2008 and would
act as a useful baseline.
3 Twin was established in 1985 as the ‘Third World Information Network’, with the following mission:
“Twin seeks to use trade to positively redress the imbalance between North and South, to build better
livelihoods for the poorest and most marginalised in the trading chain and to promote developmental
and longer term shifts in the political and economic environment.”
4 68 tonnes in 2005-6, and 156 tonnes in 2006-7 and 2007-8
15

Table 6.1 TWIN/TWIN Trading Ltd Partner-level indicators (version 13/02/08)
Basic
business
indicators
Market
access and
trade
Management,
Governance
and Members
Issue/Area Proposed Indicator
1 Production Volume (MT) of produce procured/
collected at primary level (main crop)
2 Turnover Turnover
3 Business sustainability and
members' commitment/
understanding
16
Value of annual contribution to reserves
(total and as % of trading profits)
4 Profitability Total trading surplus as % of turnover
(before second payment)
5 Liquidity Total pre-finance obtained as % turnover
6 Cost efficiency Total costs (fixed and variable) per unit
(kg/lb/bag)
7 FT market share % of sales to FT market
8 Added value sales Sales to premium markets (FT, organic
and gourmet) as % of total sales
9 Price differential of added
value sales
% difference between average price of
added value sales and average nonpremium
sales price
10 Market risk/ diversification % of sales to biggest and top 3 buyers
11 Certification management Number of 'Major Non-Compliances' from
FLO and organic certifiers
12 Quality management Number of contracts out of total not
meeting contractual requirements (for
Twin or, if possible, for all contracts)
13 Financial management Length of time between accounts are
signed off by auditors (where applicable)
OR how up-to-date are the accounts?*
14 Membership Total number of active* members
(male/female)
15 Women participation Africa: number of women in formal
leadership (all levels) and management
positions (% of total) Latin
America: number of women participating
in separate women's activities
16 Fairtrade social Premium
income
Total Fairtrade social Premium income
and per member
17 Non-business services Number, value or number of beneficiaries
of non-business services provided to
members

7. Findings of the study
7.1 The producer and processing organisations
The irrigation scheme that is now Kasinthula Cane Growers Ltd started in 1964 as a
Government rice scheme. This lasted until 1997, at which time the Illovo sugar cane
factory expanded and was looking for more raw cane to process and sell on. On
changing from rice to sugar cane, the government transferred ownership of the land
to the farmers, creating Kasinthula Cane Growers Ltd (KCGL). Although production
changed from a food crop to a non-food cash crop, food security was not negatively
affected because farmers have access to irrigated land to grow their food crops and
have an income with which to buy food. A Trust was also established - the Shire
Valley Cane Growers Trust - in which 95% of the shares of the KCGL are owned by
the Trust (i.e. by the farmers), and the remaining 5% are owned by Illovo Sugar
(Malawi) Ltd.
The rice land became Phase I of the KCGL. Subsequently a Phase II was
established. The area for the two Phases is given below:
Phase I 312.8 ha
Phase II 441.9 ha
Total 784 ha (of which 754 is irrigated sugar, and 30 ha other crops [mostly
subsistence food crops]).
Phase I farmers each have 2.5 ha of land, while Phase II farmers each have 3.0 ha
part of which is allocated to maize. The total number of farmers is 282, of which 91
are women (an increasing proportion year by year).
Day to day running decisions are made by management staff , while strategic
decisions are taken by the Board of Trustees. The Board of Trustees and the Board
of Directors both have farmer representatives, such that farmers are involved in
decision-making.
Membership of the Shire Valley Cane Growers Trust Board
Ten members include farmers, Illovo staff, lawyers, chairpersons, local
leaders and representatives of local organisations
Membership of the Kasinthula Cane Growers Ltd company Board
Ten members include farmers, Illovo staff, lawyers, chairpersons and
accountants
Previously (farmers report) there were poor relations between farmers and KCGL
managers. However, new management has recently been appointed; and is
improving relations through the application of good management practices. This is
also starting to improve cane husbandry, which will in turn improve yields, the
economic efficiency of production and income for farmers.
The Trust was primarily set up to enable farmers to receive financial support from
donors, as a not-for-profit, development entity. On the other hand, the Trust owns
95% of the KCGL company, which has its own staff and a commercial agenda to
grow and sell sugar cane. This arrangement easily creates conflicts. The Chairman
of the Board of the Trust is an agricultural person and that of the Company Board is
an accountant. The perspectives of the two Chairpersons do not always coincide.
17

Ideally, if things were operating properly, the company is supposed to only be growing
sugarcane and sell it to Illovo. The company would then declare dividends to the Trust
who would then declare the same to the farmers. The company has not yet started
making profits since it is still servicing a huge loan burden. As a result the company
has not yet declared any dividends and the loans are not being serviced properly. As a
result there hasn’t been any meaningful development from the Trust. Any
developments that have been experienced so far in the Trust are from the Premium
money from Fairtrade including helping the company with cash for its operations. The
company receives 30 percent of the Fairtrade Premium funds which are mainly used
for cane fields’ plough out and replanting.
Another major setback to the development of the Trust has been the fact that it did not
have a separate secretariat dedicated to managing its day-to-day activities. This has
been alleviated since the receipt of EU funding for the development of Phase III of the
scheme. Under this funding a Project Manager for the Phase III was recruited including
a Finance Manager. The two have also been given the task of managing the activities
of the Trust. It is expected that once the Phase III is operational and the EU Project
has ended, these positions would continue to exist within the Trust set-up. And it is
also hoped that with the large area being added through Phase III, fully operational by
2011, the debt will quickly be reduced.
Farmers are still not playing their role properly but the attitude is slowly changing with
new management in place. What has been observed is that there is a serious free
riding attitude that farmers have developed. This is for two main reasons:
1. Each farmer is given the same advance (MK12,000 per month) regardless of
the effort they put into managing their cane plots.
2. Secondly, farmers share equally 40 percent of the Fairtrade Premium funds
which they receive in form of building materials, household assets, paying
school fees for children or for themselves and so on. In this way, the Fairtrade
Premium sharing arrangement does not reward the hard working farmers. This
in some cases also discourages the hardworking farmers since the financial
gains are the same across the board.
A major problem faced by the Shire Valley Cane Growers Trust (SVCGT) is the huge
loan burden that it has with various organizations. These are as follows:
1. The Illovo overdraft, which expires in 2016/2017
2. The EU Investment Bank loan, which expires at the end of 2015
3. The Illovo Holdings Limited loan (MK9 million – US$64k 5 )
4. The World Bank soft loan obtained through the government (MK224
million [US$1.6], of which 60% is for development of the Trust, and 40% is
for development of the Chikwawa District Assembly).
The implication of these loans is that it is impossible for KCGL to make an operating
profit on their cane production. The high interest payments cannot be covered even
with a 25% deduction on cane payments by Illovo. This causes resentment among
the farmers, and has led to farmers paying themselves first in cash and now in kind
out of the Fairtrade Premium in order to supplement their income from cane sales to
Illovo.
5 Exchange rate at time of writing MK140 = US$1
18

There are now plans for a Phase III of KCGL, increasing its land area by a further
550 ha and bringing an additional 220 local smallholder farming families into KCGL.
Originally 1200 hectares were allocated to KCGL, with a further expansion to 1800
ha. Phase III is being developed under an EU project. The land being used for all
Phases is under the Chiefs as customary land.
It is hoped that the enlarged KCGL will enable further economies of scale (the
management structure will remain unchanged apart from the prospects of merging
Phase I and Phase II main committees into one) and will improve the overall
economic viability of KCGL, and enable the Trust to repay its loans. Farmers for
Phase III are selected between the traditional authorities (Village Leaders) and the
District Council. The farmers, whilst owning the Company, cannot sell their land, but
can only transfer it from one generation to the next within the same family.
19

Board of Directors
Kasinthula Cane Growers Ltd
SHIRE VALLEY CANE GROWERS TRUST
Board of Trustees
Trust Manager
General Manager Trust Administrator Trust Accountant
Finance Manager Operations Manager
Farmer Main
Committee
Farmer Sub-
Committee
FARMERS
HR Officer IT Officer Accountant Farm Managers W/shop supervisor
HR Clerk Admin Asst Asst Accountant
Cleaners Water treatment
Asst
Supervisors
Stores Clerk Accounts Clerk
Capitaos
General Workers
Driver FT Clerk Trust Clerk
Drivers
Electrician General Fitter Mechanic
Asst Electrician
Handyman
Asst Gral Fitter
Handyman
Welder Tyre fitter
Handyman Asst Tyre
fitter

The limiting factors to the success and scope of KCGL’s vision are the relatively
small land area under cane, the debts incurred in developing Phase II, the low yields
obtained by farmers and the large labour force involved in the production and
harvesting of the cane. Phase III will help to resolve the land issue, and already there
is talk of a Phase IV (while this expansion is driven by Illovo to supply its factory, the
subsistence farmers that become members of Phases III and IV are likely to see a
rise in the food security and standard of living as a result as long as the sugar market
is favourable).
The sugar cane plants are burnt and cut manually by KCGL-contracted cane cutters,
then transported by a contracted transporter who delivers the sugar cane to the
Illovo Malawi Sugar Ltd mill, approximately 25 km away. Although reliable, the
contract with the cane transporter is weighted in their favour, with a clause
increasing the charge/km/tonne as distance increases and also a standing charge for
vehicles out of season when they are not being used. The by-products of the milling
process are sugar and molasses. The sugar is sold in the local and export market
and the molasses is mainly for the local market, with no immediate prospect for
export.
There is no Fairtrade minimum price payable for sugar (following consultation with
producers), but the Fairtrade Premium is generous at US$60/tonne of sugar. If there
were no debts, the present prices paid for sugar would provide a good income for the
producers. As it is they have had to resort to using 40% of the Fairtrade Premium to
supplement incomes until the debt burden reduces. However, if the sugar price
collapses, the farmers will be very vulnerable as they are very dependent on sugar
incomes.
KCGL procures all its production inputs from Illovo Sugar Malawi Ltd. There is a 25year
contractual agreement between Illovo Sugar Malawi and KCGL that binds
KCGL to deliver all its sugar cane to Illovo. After milling Illovo Sugar Malawi Ltd
calculates all the production expenses, including overheads and the price of sugar is
calculated as an average of the various markets. All KCGL members are paid a set
amount each month (MK12000 = US$84.5) as an ‘advance’ and are then paid a
'backpay' after the sale of the sugar in the various markets on a pro-rata basis.
Payment for molasses is done by Illovo Sugar Malawi Ltd on a yearly basis after the
milling season. Commercialisation and marketing of the final product (sugar) is done
wholly by Illovo Sugar Malawi Limited. The Illovo management charges to KCGL are
reported to be high (11% of turnover up to 2007, amounting to about
US$250,000/year). More recent figures were not available.
The association with Kasinthula has been a very good development for Illovo,
providing needed additional cane to help the mill operate at full capacity and
providing the Fairtrade certification that helps to market the sugar. This is more so
now because Illovo has plans of expanding the mill. The factory expansion will mean
a guaranteed market for the cane produced by Kasinthula Phase III farmers.
Illovo works closely with Kasinthula management and farmers. Illovo management
staff visit Kasinthula about once per week, and Illovo supports the farmers there with
bulk-rate inputs (including cane planting materials), free extension advice, repairs to
irrigation pumps and the loan of machinery at cost price.
As Illovo management says: “It is in the interest of Illovo to see an increasing
number of Kasinthula smallholder farmers produce good yields and be viable,
professional cane producers”.

KCGL management staff , pointed out that the relationship between the farmers and
KCGL has been very bad in the past. Farmers were unhappy because they wanted
more presence of management in the field.
Farmers are supposed to carry out the following operations:
Hand weeding of the cane fields
Application of fertilizers
Feeder canal maintenance
Drainage system maintenance
Because of poor supervision, most of these were poorly done and this reflected on
the cane yields. There was a lot of water logging in the fields and fertilizer was poorly
applied. In 2009 new management called a meeting with the two main committees
(Phase I & II ) to highlight these technical issues. The management of the fields was
being run following subsistence farming principles and not as a commercial entity.
Decisions have to be made quickly, otherwise money is lost. For example, if a
farmer’s field was weedy, the practice has been that he/she is written a letter. This is
a long process, which can result in yield losses. The average yield at Illovo was
110.7 t/ha in 2009, while that for Kasinthula was only 91.0 t/ha. The irrigation practice
was one of the major factors explaining this yield gap. It is expected that yields will
now greatly improve now that correct siphon pipes are being used and pumps
repaired. The relationship between company management and the farmers has
greatly improved. Similarly, the relationship between the company and the Trust has
also improved.
Stakeholder analysis
The main Kasinthula stakeholders are given in the Figure below. Illovo is the most
influential of these. It is FLO certified as the processor/exporter for Kasinthula sugar.
Illovo also support smallholder sugar productivity through extension advice, testing of
soils and leaves for fertiliser requirements, procurement of fertilisers and pesticides
at bulk rates and provision of planting materials.
The Illovo sugar mill at Nchalo
The KCGL supplied 69,831 tonnes to the factory in 2009 (about 5% of the total 1.4
million tonnes processed by the mill), with an average yield of 94 tonnes/ha. This
produced 9064 tonnes of sugar (12.18 tonnes/ha). With a sucrose price of MK45442
/tonne (US$325), this gave a revenue to KCGL of MK412,449,037 (US$2.9million).
Proceeds from sales are split between KCGL and the sugar estate 60:40
respectively.
22

Cane transport
Concern Universal
Environmental NGO
Kasinthula Research Station
(MAFS)
Advice and facilities
Donor community (loans)
TWIN
FLO /
Fairtrade
FIGURE 7.2 MAIN STAKEHOLDERS OF
KCGL LTD
KCGL Ltd
District Assembly, Area
Development Committees
and Village Development
Committees
KCGL maintains good relations with all stakeholders. The EU is also key to KCGL, as
it is giving a grant for a Phase III which will see an additional 550 ha and 220
farmers. It is hoped that this will give sufficient economy of scale to enable farmers to
re-pay their loans.
23
Illovo Sugar (Malawi) Ltd
Processor/exporter
Extension, support
UNITRANS (transport
of cane)
Input suppliers
(through Illovo)
Chiefs
Ministry of Finance

7.2 The process of certification
KCGL interest in becoming Fairtrade (FLO) certified was registered in 2003. They
were given the standards to meet, and duly became certified as a Producer
Organisation in 2004. Initial certification was for a few months, but this was later
confirmed for a year. They are now certified for 3 years (through to 2012), but there is
still an annual audit by FLO-Cert which reviews their documentation, use of Fairtrade
Premium, minutes of General Assemblies, Premium Committee meetings,
communications with farmers, relationship between farmers and management, and
environmental issues. The cost of the FLO audit is €1194 per year.
While the farmers are responsible for production, it is the Company that is
responsible for compliance with environmental standards – e.g. use and storage of
chemicals, forest management, soil management and waste water management.
Illovo conduct training on safe use of chemicals
Illovo sugar (Malawi) was FLO-certified as a processor/exporter of sugar in July
2009, but have always been the buyer for all KCGL’s sugar from the outset.
7.3 Production achievements and challenges
In 2008 total KCGL revenues from cane production and sale to Illovo was MK412
million (equivalent to US$2.9 million).
While these revenues are substantial, after deductions for operating costs (pumping
water, machinery, transport, ploughing and other field operations) and salaries for the
substantial labour force there is nothing left over for loan repayment on the whole
754 ha. Despite this, members are still paid a gross amount of MK12000 (US$84.50)
per month. This adds to the increasing overdraft owed by KCGL.
This is particularly significant as cane yields have been going down year on year (last
year partly due to the breakdown of irrigation pumps). The present yields (c90 tonnes
of cane per hectare) are insufficient to generate a profit. An average yield of 100 t/ha
is needed to break even. Illovo feel that the way to higher yields is through doing
things right in the field (weeding on time, fertiliser application, water application).
Cane quality is OK, but the Illovo management is confident that it should be possible
to raise yields from 90 – 105 t/ha, without substantially increasing overheads. The
pumps have now been repaired and husbandry improved, so that with luck this year
will see an improvement.
Despite these problems, economically sugar is the best crop the smallholders could
grow. Illovo feel that KCGL overheads (on managerial staff and labour) is not
excessive.
Farmers don’t hire much labour directly, but if they are behind on field activities,
KCGL management hire labour and deduct the cost from the farmer out of his
income. Field Irrigation, is done by labour hired by the management, rather than by
individual farmers. However, in 2006, the annual FLO inspection (Brinkschneider,
2006) noted the following numbers of male and female labour employed:
24

Table 7.1 Labour employment by KCGL in 2006
Permanent Temporary Seasonal Workshop
25
and Admin
Males 303 358 272 22 955
Females 3 27 4 3 37
Total 306 385 276 25 992
Total
The inspection was very concerned because the Fairtrade small farmer generic
standard requires that Small Farmer Organizations should not structurally depend on
hired labour, but should carry out the field work mainly with family labour. The
feedback workshop among other things sensitized the farmers on the importance of
reducing their dependence on hired labour.
Records supplied by KCGL show the following figures for labour between 2006 -
2010.
Table 7.2 Labour employment by KCGL from 2006 - 2010
Category April 2006- April 2007- April 2008- April 2009-
March 2007 March 2008 March 2009 March 10
Male
permanent
workers
695 540 545 430
Female
permanent
workers
5 10 25 30
Total
permanent
workers
700 550 570 460
These demonstrate that the number of permanent workers has been decreasing year
on year (with a slight increase in the number of female employees).

8. Impact areas
8.1 Changes in social structure
There has been a radical change in social structure due to the change of Kasinthula
farmers from mainly rainfed subsistence farming with some cotton to an irrigated
cash crop (initially rice). This change occurred when the rice scheme was started
and was not attributable to Fairtrade. This change led to some families being
allocated land 6 in the scheme and others not (some farmers were suspicious of the
scheme and decided not to be part of it). This difference has been exacerbated with
the change to sugar, and the economic benefits that sugar has brought to KCGL
members. Since 2004, with Fairtrade certification, the 40% of Fairtrade Premium that
is allocated (in kind) to KCGL members has further accentuated the differences
between those in the company and those who are still subsistence farmers.
The Fairtrade Premium goes some way to redressing the balance between members
and non-members through the community development initiatives, such as water,
health and environmental projects. The Case Studies of households that are in KCGL
and those that are not members of the company demonstrate these differences (see
Section 8.3).
8.2 Changes in the socio-economic situation of participating producers and
their households including their income, working conditions, living conditions
and access to basic services
The income of participating producer households is a comparatively good one,
especially for those families in good health who can cope with the majority of the
labour requirements (see Case Studies in Section 8.3). The table below shows the
monthly income from Illovo. This is the gross advance from which deductions can be
made for labour, inputs etc.
Table 8.1 Monthly advances to KCGL producers
Year Monthly advance from Illovo
1998 MK800 ($5.7)
1999 MK1000 ($7.1)
2000 MK3000 ($21.4)
2001 MK3000 ($21.4)
2002 MK5000 ($35.7)
2003 MK6000 ($42.9)
2004 MK7000 ($50)
2005 MK8000 ($57.1)
2006 MK9000 ($64.2)
2007 MK10,000 ($71.4)
2008 MK11,000 ($78.6)
2009 MK12,000 ($85.7)
The income (technically an advance) is stable over the year and reliable. Income has
risen in most years due to farmers complaints that they need more to live on. This
increase in advances has meant that the KCGL overdraft continues to rise. There is a
25 year contract between Kasinthula and Illovo providing the stability that is
necessary for sugar cane, which is a long-term crop.
6 Ownership of the land remains with the Chiefs. Members may not sell the land, but can pass
it on to the next generation of their family
26

Major economic and social benefits also accrue to producers directly and indirectly
through the Fairtrade Premium. The Fairtrade Premium is US$60 per metric tonne of
made sugar. Annex 4 (separate volume) gives a detailed breakdown of the Fairtrade
Premium received every quarter. The following table summarises the annual
Fairtrade Premium coming to KCGL.
Table 8.2 Annual Premium received by KCGL
Year Premium received
2004 US$20,717
2005 US$72,613
2006 €196,071 (US$260774) 7
2007 €303,181 (US$403230)
2008 €607,069 (US$807401)
2009 €621,504 (US$826600)
The Fairtrade Premium is divided as follows:
40 percent for support to farmers livelihoods
30 percent for cane ploughout and replanting 8 , and
30 percent for community development projects.
This distribution was decided in consultation with FLO-CERT who assisted the Trust.
The 40 percent farmer’s livelihood component was decided upon at the General
Assembly initially to support food security because of poor yields following droughts.
This was accepted by FLO-CERT but it was agreed that the procurement of the items
demanded would be done centrally so that farmers receive materials and not cash.
This contrasts with the situation reported by Phillips in 2008 (see Annex 6), when he
stated: “In conflict with Fairtrade standards and the FLO’s wishes, many farmers
admitted that they still received approximately 40% of Fairtrade premium receipts
directly to supplement their incomes”.
The benefits equivalent to 40 percent of the Fairtrade Premium are divided equally
between the 282 farmers. The areas that are covered under livelihoods are the
following:
School fees paid directly to the school (any deficit is paid directly by the
farmer concerned)
Materials for building (cement, timber, iron sheets, paint etc)
Bicycles
Farm equipment such as ox-carts
Food – mainly maize
Electrical appliances (fridges, TV sets, music systems, etc)
When the members were asked to report the amounts of Fairtrade Premium funds
that were allocated to farmers during the past 12 months (since 4 th Quarter in 2008)
the following were the figures given:
The equal distribution of advances to KCGL farmers means that there is no incentive
to individual producers to work hard to increase yields, and there is a tendency
amongst some to be free-riders. Getting yields up will depend on countering these
tendencies by distributing advances according to the individual yields delivered. It is
7 Exchange rate: US$1 = €0.75
8 There is a KCGL 5-year strategic plan that includes ploughout for each of the 5 years.
27

interesting to note that these households earn US$5.9 a day, way above the
international poverty line.
Table 8.3 Average income per farmer between October 2008 and September 2009
Quarter Quarter
Premium
amount
Sum of monthly
Illovo advances in
the Quarter
28
Quarter Premium + Illovo
advances
4 th Quarter 2008 MK60,000.00 MK33,000.00 MK93,000.00
1 st Quarter 2009 MK18,000.00 MK33,000.00 MK51,000.00
2 nd Quarter 2009 MK49,000.00 MK36,000.00 MK85,000.00
3 rd Quarter 2009 MK54,000.00 MK36,000.00 MK90,000.00
Annual gross income equivalent per farmer = MK319,000 (US$2155)
The use of 30% Fairtrade Premium for ploughout and replanting is to counter longterm
neglect of replanting and thereby increase yields and therefore the economic
viability of KCGL. Because of the long-term nature of the crop, these improvements
are only now starting to have an impact on yield.
The remaining 30% is spent on community development projects within, and
occasionally beyond the catchment area of the KCGL producers.
Clean water supply in Chinangwa village
3.5 ton truck bought with Premium funds
The 30 percent allocated to community
development projects has been used in the
implementation of a number of projects, including
boreholes, piping and taps for clean water supplies,
bilharzia drugs, village electrification, clinic
extensions and bicycle ambulances. These have
benefitted the whole community, while the other
Fairtrade Premium uses have had direct benefits
only to the members.
The project selection process for the community development component of the
Fairtrade Premium is very democratic, and also involves village heads. For projects
to go into the villages concerned, the village headmen from those villages have to
write a letter to the Premium Committee requesting the projects. The village heads
indicate the projects they need. The committee shares the requests with the whole
body of the farmers (the General Assembly) to ratify the demands. In a few cases,

demands have come from villages outside those surrounding the KCGL land where
the member farmers come from. Sometimes the Premium Committee goes into the
concerned villages to verify the validity of the demands. For example, if a village is
asking for a borehole, the committee has to make its own assessment of whether
indeed that need exists in the specific village. All the approved projects are then put
into a projects work plan which is prioritized depending on the urgency of the need,
the population affected and the likely benefit from the project.
For the first time, the Premium Committee has approved 3 boreholes from three
villages which are outside the catchment area. But this is due to the fact that the Area
Development Committee (a decentralized lower level of the District Assembly) made
a special request to the premium committee. The villages do not even have a stream
close by let alone a borehole. These will be funded with the Fairtrade Premium which
is to come in January 2010. The full breakdown of Fairtrade Premium use over time
is given in Table 8.4.
Table 8.4 Kasinthula Fairtrade Premium Fund Expenditure
Year Premium Projects Premium spent
(MK)
Remarks
2004 Kapasule borehole drilling 400,000.00 Project completed
2005 Purchase of farmers developmental 5,076,000.00 Project completed
2005
materials and school fees
Chinangwa borehole drilling 356,150.00 Project completed
2005 Purchase of bilharzia drugs for Kasinthula
clinic
420,000.00 Project completed
2005 Travel costs of farmers to China for FLO 528,259.00 Project completed
meeting
2006 Farmers Revolving Fund 7,453,668.75 Project completed
2006 Cane fields ploughout and replanting 4,370,437.27 Project completed
2006 Chinangwa village electrification 8,787,877.00 Project completed
2007 Cane fields ploughout and replanting 7,198,994.77 Project completed
2007 Purchase of farmers’ developmental 28,912,961.08 Project completed
2007
materials and school fees
Workers safety and Health training by
Red Cross
183,095.00 Project completed
2007 Piped and tap water of 5 neighbouring
villages
784,362.35 Phase 1 completed
2008 Trust purchase of computers 440,000.00 Project completed
2008 Purchase of 3.5 Ton truck for Fairtrade
operations
7,764,677.50 Project completed
2008 Purchase of farmers’ developmental 32,701,000.00 Project completed
2008
materials and school fees
Kasinthula clinic extension 4,249,475.00 Underway
2008 Cane fields ploughout and replanting 43,706,005.09 Project completed
2008 Salumeji to Ntondeza electrification (5
villages) coverage
6,149,294.75 Underway
2008 School fees costs for farmers and their
children
2,895,000.00 Phase 1 completed
2008 10 boreholes in 10 villages 10,662,298.00 Project completed
2008 Bicycle ambulances (4) 256,000.00 Project completed
2009 School fees costs for farmers and their 4,543,936.15 Underway
children
2009 Kasinthula clinic extension 925,528.42 Underway
2009 Cane fields ploughout and replanting 21,081,546.16 Underway
TOTAL MK 199,846,566.29 (US$1,427,475)
29

Some of the impacts of these Premium projects are recorded in the Case Studies
(Section 5.2).
An ambitious programme of work is planned for using the Fairtrade Premium over the
next five years, as follows:
Phase II electrification of Mtondeza village
Construction of Chinangwa Junior Primary School
At least 2 Trucks for transportation of sugarcane to the factory
Payment of school fees for farmers and their children to continue their
education
6 computers for 3 Secondary Schools as a way of improving IT skills in the
area. The targeted schools are: Chikwawa Secondary School; Mthumba
Secondary School; Dzumila Secondary School.
Construction of a Hall at Kasinthula for conferences and meetings.
Construction of a Lodge at Kasinthula as an Income Generating venture for
the Trust
5 boreholes (3 of which will be in non member villages)
Phase II electrification of Chinangwa village
Upgrading of the road with gravel between Chapananga road to Chinangwa
village (about 3 km of road length).
An ambulance since currently they rely on the Truck for transportation of the
sick
20 percent of ploughout component will be used to support about 50 ha of
Phase III expansion
Construction of the Namalindiwa to Mtondeza tap water network
Tree planting project.
8.2.1 Socio-economic impact data from David Phillips study in 2007/8
From interviews with 47 farmers up to June 2008, David Phillips (see his full account
in Annex 6, Volume 2 of this report) found that:
- 62% of farmers said they had experienced a large increase in income since
certification in 2004
- 55% had experienced improved credit access
- 40 % of farmers stated that their income was sufficient to meet basic needs
- 45% of farmers saved more money, and 45% bought more livestock
- 75% of farmers felt they had greater ability to make decisions to affect their
livelihoods
- 73% of farmers knew what the Fairtrade Premium is
- Most farmers believe there has been a positive impact on relations with
employees since certification
- 81% of farmers believe access to information about their cane has improved
- 72% of farmers stated they received some training – mostly in the form of
information about fair trade, sugar markets, and Good Agricultural Practice
(GAP)
- Since certification, 53% of farmers stated that they work harder, and 32%
stated they produce better cane
- 81% of farmers believe they now participate more in Kasinthula decision
making
The above data from Phillips strongly suggests that many of the sugar famers of
KCGL believed in 2008 that they were in a better economic, social and political
situation since certification. However Phillips’ data also shows that the majority of
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KCGL employees do not feel that they have benefitted in the same way. In fact most
of his data suggests that in 2008 working conditions had either stayed the same or
deteriorated. The appointment of a new Trust Administrator and Human Resources
Manager in 2008 was seen as a step forward to increase the capacity of the
management team. The new staff quickly got formal contracts in place for employees
and encouraged the establishment of a workers committee.
8.3 Case studies of KCGL members and non-member farmers
The following case studies highlight the land ownership, history, livelihood activities,
Fairtrade benefits and incomes of a range of families included in, and of some
presently excluded from, KCGL.
Case Study 1:
Case Study 1 & Family Age Education Crops Grown/farming role
Farmer 1 35 None 2.5 ha sugarcane, 0.3 ha
maize under irrigation
(Daughter) 18 Form 1 Assists in the cane field and
other activities
(Son) 15 Standard 8 Assists in the cane field and
31
other activities
(Son) 12 Refused to Also assists with lighter and
go to school urgent tasks
(Daughter) 10 Standard 5 Does not assist in any
farming activities
(Daughter) 7 Standard 1 Does not assist in any
farming activities
Before going into sugarcane growing through the scheme, Farmer 1 used to grow
maize and cotton in the same field.
She indicates that there were a lot of conflicts with local farmers before their land was
converted to sugarcane from the various crops they used to grow. They thought that
Illovo was going to take their land. But this was mediated through the District
Commissioner and some local leaders and finally most of the farmers accepted.
Some of those who did not accept migrated to other areas. She also pointed out that
some of those who were giving problems now have more land (2.5 ha for cane and
0.3 ha for growing maize under irrigation) than before amalgamating the land into a
scheme. In addition, in terms of welfare, farmers have improved their income. Every
farmer member gets a gross income of MK12,000 but after deducting fertilizer loans
and casual labour charges, she receives a net average of about MK5,000 per month
(US$36).
Farmer 1 reported that she has really benefited from Fairtrade which she seemed to
understand very well. She pointed out a number of specific benefits:
She Built a house with iron sheets with Fairtrade Premium benefits
She has been bought more iron sheets which she wants to use for building a
smaller house for her children
She already moulded some bricks for the small house
She has also requested for 11 bags of cement (This is worth MK29,700 at
current cement price about US$209.15)
She has acquired two push bikes with Fairtrade Premium funds
Food security is ensured and she always has enough maize for the family.
However, she indicated that the only challenge was the fight for irrigation
water due to the heat in the area. Growing maize in winter (March – August)

is better than thereafter when it is too hot for effective use of irrigation water.
The yields are also better during winter. She recently harvested 8 bags of
maize which she says is enough to take the family to the next harvest since
they plant maize twice in the year.
32
The photograph shows the house
that she has managed to have
constructed with Fairtrade Premium
funds. The grass thatched house
which she used to live in was
demolished.
Case Study 2:
Case Study 2 & Family Age Education Crops Grown
Farmer 2 (Chinangwa 38 None Cane 2.5 ha and maize 0.3 ha.
village)
Also grows sorghum on less than
an acre. Also owns 2 cattle and 4
goats
(spouse) 39 None
daughter 13 Std 3 Does not go to the garden
son 9 Std 2 Does not go to the garden
The family uses 3 direct hired labourers who assist with carrying out some of the
field operations for all the crops. They are paid a monthly wage of MK2,500.
Farmer 2 and his family used to grow cotton, sorghum, maize and millet before the
Phase II cane scheme development. They joined cane growing in 1998 at the start of
Phase II activities. He said that most farmers were initially not willing to surrender
their land because Illovo pushed for cane growing only. But after discussions, it was
agreed that some land should be set aside for maize growing.
He says that although the family status started improving after joining the cane
growing, really significant changes started with Fairtrade certification in 2004.
Main changes that have taken place in the household since the Fairtrade Premium
started flowing were reported as follows:
Constructed a nice house with iron sheets (photograph)
Has started a small kiosk where he sells assorted grocery items.
Bought 2 cattle
Bought a sofa set, refrigerator, TV and home theatre
Built three houses in the village (2 for other people to rent)
Farmer 2 also reported that besides the Fairtrade Premium progressively increasing
since 1998, the monthly advances that they receive from Illovo have also
substantially increased. The progression according him has been as follows:
Year Monthly advance from Illovo

1998 MK400 fortnightly (MK800 per month)
1999 MK1000
2000 MK3000
2001 MK3000
2002 MK5000
2003 MK6000
2004 MK7000
2005 MK8000
2006 MK9000
2007 MK10,000
2008 MK11,000
2009 MK12,000
He reported that this amount of money is uniformly given to all the 282 farmers
regardless of the volume of cane harvested from their fields.
Farmer 2 reported a number of projects that had taken place in the community
around the Fairtrade Premium. These are as follows:
Some hammer mills have been installed in the village by business people
following the introduction of electricity to the village through the Fairtrade
Premium. Previously, people used to go to Dyeratu 5 kilometres away for
those services. This has reduced the time women spend in walking to have
their maize milled.
2 boreholes have been drilled in the village
Installation of electricity in Chinangwa village
People involved in cane growing have stopped seeking off-farm jobs because
they have a steady income which is enough to meet the basic needs by
village standards. He indicates that if the Fairtrade Premium stops flowing,
people may go back to what they used to do before.
The few farmers that are not participating in cane growing are mostly new
settlers in the village. Some who did not want to join sold their land and went
to town but they are now coming back regretting their choice. They would like
to join cane growing after noticing significant changes in the livelihoods of all
those who joined the scheme.
He said that most of the environmental concerns were addressed directly by the
company management since it is the one responsible for all operations. However, he
indicated that an International development NGO has been mandated by the EU
project to support the farmers in environmental rehabilitation mainly through tree
nursery establishment and woodlot development.
Case Study 3:Farmer 3
Case Study 3 & Family Age Education Crops Grown
Farmer 3 33 Form 3 2.5 ha cane
0.3 ha maize
(spouse) 28 Standard 8
daughter 9 Std 2 Does not assist in farming
daughter 2 years -
Before cane growing was introduced into his village, Farmer 3 and his family used to
grow several crops. These were cotton, maize, sorghum, millet and some beans
during winter.
33

The idea of growing came in the village through the chief. Not everyone received the
idea immediately. Those who did not want to grow cane left the village. He recalls
that in the same year, on 14/11/1998, farmers planted the first cane in Phase II as a
group.
He pointed out that the yield had declined mainly after the contract with a private
agricultural engineering comapny was discontinued. Since they started growing cane,
the proposal was for them to receive payment from Illovo once a year, but this was
inconvenient and an agreement was reached that farmers would be paid an advance
once a month, which has been periodically revised upwards following complaints
from farmers that the figure is too low.
Farmer 3 was very knowledgeable of Fairtrade issues and could explain the concept
without any problems. He indicated that his household had greatly improved since
certification and the beginning of Fairtrade Premium in 2004. He said that the
household had managed to do the following:
He indicated that previously the household never managed to harvest enough
maize for the whole year. But following the improvement in the status of the
household, and the use of both inorganic fertilizer and organic manure, he
indicates that they are now always food secure.
Bought a wheel barrow to assist in ferrying manure to the field and an ox-cart
Has managed to obtain a driving license with FT funds
Has applied for 15 bags (worth MK40,500 at the current price of cement or
US$285.21 9 ) of cement to build another house, and has acquired enough iron
sheets to roove the house
Has bought a bicycle which has improved mobility
Case Study 4: Farmer 4
Case Study 4 & Family Age Education Crops Grown
Farmer 4 25 Diploma in 2.5 ha of cane
Accounting 0.3 ha of maize
(spouse) 19 Std 8
daughter 3 years The only child they have
Farmer 4 reported that he used to grow some cotton and maize before the
introduction of cane to the village. The maize used to do very poorly because of the
soils.
He indicated that the field that he and is wife are cultivating used to belong to his
grandmother. When they started growing cane, they got a very small advance
(MK1000/month). This has gradually increased, and is currently MK12,000 per month
(gross). He indicated that during each year, there are at least 2 months when they
receive additional money after Illovo has reconciled its figures of cane volumes from
Kasinthula.
Farmer 4 indicated that Fairtrade had greatly improved his household. A number of
indicators were highlighted:
They are always food secure since they are able to buy food if they have run
out of their own production.
He managed to go through an accounting training at Business College where
the fees were paid with Fairtrade Premium funds
9 The exchange rate at time of writing is about MK142 to US$1.00
34

He plans to build a house of his own because the one they are using now was
inherited from the grand mother.
He indicated that it was good that FLO agreed that 40% of Fairtrade Premium funds
could be used for development of the households in terms of their needs in addition
to the 30% used for community development projects. This has assisted in the
transformation of most households that are involved in the growing of sugarcane.
He said that each time the Fairtrade Premium arrives all the farmers sit together and
share it in a very transparent manner. The 40 percent of the Fairtrade Premium is
divided by the 282 farmers and each farmers demands whatever they need (within
agreed upon items) with the same amount of money regardless of the status of the
farmer within the Trust. The 30 percent meant for development projects is also
allocated to projects in a very transparent manner.
Case Study 5: Farmer 5
Case Study 5 & Family Age Education Crops Grown
Farmer 5 65 Form 3 Grows cane 2.5 ha + 0.4 ha
maize, also grows some
cotton (1 acre), millet on less
than an acre and some
beans intercropped with
maize
(spouse) 51 Std 2
daughter 15 Form 4 She assists in activities of
the garden when she is free
from school
daughter 13 Std 8 She assists on lighter duties
on the farm when not in
school
son 11 Std 6 Does not do any thing in the
garden
The main source of income for the household is sugarcane while the main staple is
maize.
Farmer 5 understands the meaning of Fairtrade very well. He has a better education
background than most of the smallholder farmers growing sugarcane. He says that
since he started growing cane and most particularly since 2004, the situation has
greatly improved. The main achievements and assets accumulated with Fairtrade
Premium funds were given as follows:
Has managed to send all his 7 children to school, and some of them are now
independent
Built 2 houses, both with burnt bricks and iron sheet rooves
Bought a bicycle which he uses for various errands including going to work in
his plot. (He was interviewed at his plot where other family members were not
available)
The household is always food secure. If they run out of their own production,
they are assisted through Fairtrade Premium.
He believes that fields are better taken care of when they carry out the
operations themselves than when the company puts in hired labour. He
pointed out that farmers should be encouraged to carry out the operations
themselves to ensure better yields.
The standards of FLO-CERT are too restrictive mainly with regards to the
activities or items that could be financed with Fairtrade Premium funds. He
35

elieves that the cash that they get from Illovo is not enough mainly in view of
the deductions for the items they get on loan. A little bit of cash is also
required. He indicated that if this was done, maybe farmers would be deterred
from selling some of the materials they demand once they get them.
Case Study 6: Farmer 6
Case Study 6 & Family Age Education Crops Grown
Farmer 6 37 Form 4 and
Diploma in IT
36
-SVCGT member
- Farmer –cane and maize
-Businessman (Grocery shop)
-9 cattle, more than 20 chickens
spouse 33 Std 7 Spouse
daughter 17 Std 7 Assists in the garden when free
daughter 16 Std 6 Assists in the garden when free
son 14 Std 6 Does not work in the garden
son 11 Std 4 Does not work in the garden
daughter 11 Std 4 Does not work in the garden
daughter 7 Std 2 Does not work in the garden
son 1 - -
Farmer 6 and his family joined KCGL in 2004. At this time, he was already working
at the company. He used to work as time keeper since 1999. In 2006, he responded
to an advertisement in the company where they were looking for Fields Clerk.
However, in 2007, he was transferred to the accounts department as an Accounts
Assistant.
In 2004, the Trust decided to redistribute the land that until that time was cultivated
as a group garden. The group garden was poorly managed because of conflicts
within the group. So this gave an opportunity to 10 more individual farmers to join
Phase II. Since the sugarcane was already big, this group of farmers started enjoying
the benefits from their plots the same year .
Farmer 6 like other farmers who are also working for the company receives three
types of income in the course of the year.
His monthly salary of MK13,000 per month x 12 = MK156,000.00
His monthly advances of MK12,000 from Illovo x 12 = MK144,000.00
His share of Fairtrade Premium = MK150,000/year
This means that for the year 2009 and the 3 rd Quarter (Fairtrade Premium only) his
total income was MK450,000 10 (monthly average of MK37,500 or US$264.08) which
is about US$3,000. By Malawi rural standards, farmer 6 could be considered as a
very wealthy person.
He has accumulated the following assets since 2004:
7 bicycles for children which they use for going to school
Cement for plastering the house which he had already built and iron sheets
for his mother-in-law
Electrification of Chinangwa village, including his house.
Food security all year round
2 refrigerators, one ox-cart, a TV set, chairs and a table
A motor bike which he uses for going to work
10 Exchange rate at time of writing of MK142 to US$1.00

A grocery shop at Dyeratu Trading centre (3 km from the village)
Since he has several sources of income, he is planning to start saving his salary for
future education of the children. He also wants to buy more livestock which he said
was a very lucrative venture.
Case Study 7: (non-KCGL member)
Case Study 7 & Family Age Education Crops Grown
48 None - Maize on 1 acre
Farmer 7
- Pigeon peas (0.5
acre)
- Sweet potatoes
sometimes
- Sorghum
(Husband) 55 Std 8 He also does some petty
trading but gets little money.
On this day he was out
looking for produce to resell
daughter 23 Form 4 Assists in farming. She has
completed Form 4 and is
looking for a job
son 16 Standard 6 Assists in farming
son 9 Standard 2 Does not go to the garden
son 7 Standard 1
daughter 3
Farmer 7 says that they are not originally from this area. They came to the area from
Nsanje 10 years ago. The husband has been working as a labourer for various
people and they decided to settle in the village.
They feel that in many ways, they have fewer household assets than those growing
sugarcane. They are not food secure and live in poor houses (see photo). “When we
do not have food, we look for ganyu (paid labour) from those growing sugarcane.”
They do not have all the good things that those growing sugarcane have like
electricity, radios, fridges, TV sets etc.
She indicated that they failed to access land in the scheme because they had just
arrived in the area. Although they do not have individual household level benefits
from Fairtrade, they are consulted when the Fairtrade Premium Committee is
planning community development projects. And they also benefit from the safe
drinking water from the boreholes that have been drilled with Fairtrade Premium
money.
Case Study 8: (Non-KCGL Member)
Case Study 8 & Family Age Education Crops Grown
45 Std 4 Cotton – 1 acre; Maize – 1
Farmer 8
acre; petty trading and beer
brewing; 3 pigs and 3 goats
(spouse) 38 Std 1
son 9 Std 2
daughter 7 Std 1
daughter 2 yrs 6 months
37

son 1 year
They migrated from another area and came into the village in 2004. As a result they
found that all the land in the scheme was already allocated. The main differences
they saw with those who were members of KCGL were:
Members of the scheme receive some money from Illovo at the end of every
month. Farmer 8 indicated that even if they did some business, they could never
earn what the members were earning from Illovo plus their “income” from the
Fairtrade Premium.
The non-members were more food insecure and usually have to buy from the
market because production is usually poor when they rely on rainfall only.
Some members of KCGL have electricity in their houses. This is a major
difference.
8.4 Changes in the organisation of rural areas / workers’ organisations
The KCGL irrigated lands are a discreet entity, unlike a dispersed smallholder
operation. Its influence covers 13 villages, but the present number of households
directly affected is small (282). That said, the certification requirements and the post
certification audits have brought changes in organisation in that the farmer-run
Committees described below are now in place to ensure more transparency and
accountability in the organization. These are in addition to the KCGL management
staff and the EU-funded posts of Project Manager and Finance Manager. There is
some overlap between committees as the total number of farmers is only 282.
The farmer-run committees include Phase I and Phase II Main committees (likely to
be merged in the near future) the Premium committee, the Procurement subcommittee,
the Audit sub-committee, the Field monitoring sub-committee, the
Community Development sub-committee, the Disciplinary sub-committee and
Revolving Fund sub-committee. Each of these is dealt with separately in brief below
and in more detail in the Annex 3.
In addition to these committees, which are made up of producers, farmer meetings
are held quarterly, with extra meetings as necessary. These are convened by the
Main committee chairmen. About 75% of farmers meet each time. During the
meetings farmers are briefed on what the Company is doing and any upcoming
activities. Fairtrade issues (especially Fairtrade Premium use) are discussed.
The Main Committees (Phase I and Phase II)
The Phase I committee has ten members (3 women and 7 men), who were elected
into office in April 2007. The committee work under the Trust but represent the
interests of the farmers. The Chairperson of the main committee sits on the Board of
the Trust and also represents the farmers on the company Board.
Since 2007 they have undergone training in business management which was held
at a local College. The training was for one week and its main focus was on
business training and management, land issues and land rights, organizational
structure and roles and responsibilities, accounting and book keeping. A second
training was organized by Twin Trading focusing on Quality Management Systems. It
started with the whole committee and then finally selected a few members from
Phase I, Phase II and some staff making a total of 10 who went for a series of
intensive trainings at Nchalo. The focus areas were work instruction, risk analysis,
flow chartsand business knowledge (understanding of stakeholders, customers,
suppliers )
38

The relationship with the KCGL Board is generally good but there are some problems
between them:
The education gap between the company Board and the members of the
Trust. This also affects the composition of the Trust Board. The education
level of the farmers is low 11 , making equal dialogue difficult. For example,
farmers complain that decisions by the company are sometimes made without
consultation with the farmers.
Employment of the staff in the company usually creates some conflicts. For
example, farmers would like some of their young graduates from the area to
be employed in the company. But the company thinks this would be conflict of
interest as they may not be able to run the activities objectively.
The Premium Committee
The roles and activities of the Premium Committee were explained as follows:
Each month they monitor the amount of Fairtrade Premium that has come
into their bank account. At the end of the quarter they add up all the Fairtrade
Premium before it can be shared
At the end of the quarter, they convert the 40 percent of the Fairtrade
Premium meant for farmers’ livelihoods development into local currency.
Then all the member farmers are called for meetings 12 where they are
informed about the amount of Fairtrade Premium that has come and how
much will be allocated to each farmer.
Farmers are requested to present their demands to the Premium Committee
which liaises with the Procurement sub-committee to procure all the materials
demanded by the members.
They also discuss the development projects that are to be funded with the 30
percent of the Fairtrade Premium.
The Premium Committee, together with farmers, proposes projects for the
year. Communities also lobby for their preferred options through their village
leaders. These are voted on by all stakeholders in General Assembly
meetings held as necessary. After this the Premium Committee manages the
process of utilisation of the Premium in collaboration with the Procurement
committee. It has to follow a specific procedure for quotations, selection of
contractors etc. and follow good practices of financial and technical
management of the projects.
The funds are then allocated to the projects that have been approved. This is
done in line with the annual/five year project plans. The prioritization is done
within the projects that have already been identified usually depending also
on the amount of Fairtrade Premium available.
The current members (which include a representative from the labourers) were
elected into office in 2007. Some training has been received since then but still
considered not adequate. The training received has been in the following areas:
Quality management systems
Organizational structure
Roles and responsibilities of the members
Criteria and procedures for selecting projects
11 Education levels for the Committee members of all the committees are given in Annex 3 (separate
volume). Few members attended secondary school and many did not even finish primary school,
(Standard 8). Only one has a tertiary level qualification.
12 These mass meetings tend to be by Phase (i.e. one meeting for Phase I and a second for Phase II) as
they have separate Main Committees (soon to merge).
39

Monitoring and management of Fairtrade Premium funds
A smaller group went to Illovo for further training in the following areas:
What is a business?
Flow charts
Work Instruction
The trainings were conducted by TWIN Trading.
While the results speak for themselves, with a wide range of projects successfully
completed or on-going, the Premium Committee recognised the need for further
training in:
Book keeping
Accounting and general financial management
Development planning and budgeting
Chain of command in decision making
There is a large capacity building component to the EU support project, which is
expected to cover these topics.
Field Monitoring Sub-Committee
The field monitoring sub-committee was elected into office in 2007, but have not
received any training to better understand their roles and responsibilities apart from a
sensitization to their roles by the Chairman of Phase I, as follows:
Monitoring status of the fields and advising farmers accordingly. For example,
if a farmer is not weeding their field, they are advised to do so. If they do not
respect the advice, the committee will report the matter to the operations
manager of the company who will then assign casual labourers to the field
concerned to do the weeding. The farmer will then be debited the cost of the
labour as they receive their monthly advances.
All the transactions taking place in each farmer’s field are recorded. For
example, the number of fertilizer bags applied to each plot, the number and
timing of casual labour operations. The owner of the plot counter signs for any
casual labour work that has been done in his/her field, which will be deducted
from income.
The committee also signs for the amount of inputs that have been used on
each farmer’s field to ensure that right amounts are deducted from the
farmer’s incomes.
When the company workers are tilling the land, the committee monitors the
depth of the tillage to ensure that there is adequate depth.
When cutting the cane, they also monitor the height / depth of cut to ensure
proper ratooning conditions.
Challenges specific to these roles are:
The older farmers usually cope poorly with labour demands in their fields and
are therefore disproportionately hit by labour charges.
Household size determines the amount of family labour able to work on the
fields. Some farmers, to save money and carry out activities in a more timely
manner, hire their own labour instead of waiting for the company to put in
their casual workers which is more expensive for the farmers.
Sometimes farmers forget labour records and they dispute the deductions of
their pay at the end of the month.
Disciplinary Sub-committee
40

The disciplinary committee oversees disputes concerning all operations in the Trust.
These are mainly disputes concerning the Field Monitoring Committee, the company
and the farmers, such as poor field operations (weedy fields) and coming to meetings
drunk.
Because of the agreement that is signed when farmers are allocated a plot of land,
they cannot be expelled from KCGL. They are given ‘user rights’ from the chief and if
a farmer dies, the next of kin takes over the land. The committee is also responsible
for sorting out any conflicts that may arise after the death of the owner of the land.
Audit Sub-Committee
The roles of the Audit Sub-committee are:
To monitor the way the funds are used in the organization, including the
Fairtrade Premium
To check stocks of materials such as fertilizersand chemicals to ensure that
all that is bought is being used in the fields and not diverted.
To check all machinery to ensure that they are operational
To ensure money is only used on accepted expenses.
To ensure transparency in terms of the flow of funds and how they are being
spent. On this issue, they collaborate very closely with the Premium
Committee. To check all financial files including all the cheques that have
been written and issued out against invoices.
To check the workforce size and payments being made in terms of salaries
and wages - to ensure there are no ghost workers in the organization.
To cross check with the Farm Monitoring Committee to ensure that what was
captured by this committee relates to the payments that have been made
during a given time period.
To check the company budget for the whole year and how it is used.
This is challenging, the more so because of the huge education gap between them
and the people they are trying to monitor - mainly those working in KCGL. Despite all
this, they pointed out that they have never been given any training relating to their
roles and responsibilities. They said that they were not very sure whether they were
doing the right things or not.
Revolving Fund Sub-Committee
The sub-committee was created after noticing that farmers had cash problems and
could not easily access any formal credit. Some of them were involved in informal
money lending practices. Hence, the issue was discussed within the Trust particularly
through the General Assembly and agreed upon in 2004. Coincidentally, this was
also the time when the first Fairtrade Premium started flowing to Kasinthula.
Its main role is to keep records of people getting loans from the revolving fund
including repayments. The interest rate is only 5 percent which is far lower than from
most financial lending institutions where interest rates are 15 percent and above.
Each farmer can access up to an average of MK50,000 (US$357) through the
revolving fund and it has to be repaid within 12 months. However, some members
may exceed the MK50,000 ceiling particularly if they have some school fees to pay
for their children or for themselves. All repayments are done through the Trust Office
when people are receiving their monthly advances from Illovo.
It was pointed out that because some farmers get so many items on loan, sometimes
they receive nothing from the monthly advances from Illovo. Thus some sell some of
41

the materials to raise cash. Proper education is required on this matter to ensure that
farmers spend their incomes wisely.
As with some other sub-committees, these have never received any training to
enable them to better carry out their duties.
Community Development Committee
The members of the community development sub-committee are: chairpersons of
the Phase I and Phase II main committees, 1 chief (T.A. Katunga) and , a farmer.
These are the ones who identify potential development projects (that are then
considered by the Premium Committee) in consultation with KCGL members and
other community members including those who are not sugarcane farmers. To do
this, they work very closely with the Village Development Committee (VDC), and all
other District-level development structures. They cooperate with villages and consult
them to seek development ideas (that are in line with FLO requirements).
Hired Workers
The 282 KCGL farmers are the main beneficiaries of Trust. However, the Company
employs permanent, seasonal and casual workers to ensure the effective running of
KCGL. In 2006, the FLO auditor counted 992 labourers of all categories (Figure 7.1),
but over time this has been reducing, and the March 2010 figure was 460 (430 men
and 30 women – Figure 7.2). A concern is that this labour force is not receiving a fair
share of the benefits from Fairtrade.
A permanent labour force is maintained to carry out the irrigation and to keep the
canals maintained. Smut rougers are trained to go through the cane fields line by line
checking for any signs of smut (a fungus disease – see photo) on the plants.
Sugar cane smut
The group of workers met in the field indicated that things had greatly improved since
Fairtrade certification and the PhD study made by David Phillips (Newcastle
University – see https://theses.ncl.ac.uk/dspace/handle/10443/1103 ) which criticised
the very limited benefits enjoyed by Kasinthula workers, and the inequality between
Kasinthula farmers and others in their communities.
. Some of the changes, many supported by the Fairtrade Premium, are:
42

Frequent ploughing out and replanting of cane since there is money to
finance the activity (30 percent of the Fairtrade Premium is allocated to this
activity). This has helped to improve productivity.
Relationships at work have improved in that they can now complain openly
without fears of losing their job. The labour force is represented on the
Premium Committee and the Disciplinary sub-Committee
They are now regularly given protective clothing such as gumboots and
overalls. (See photograph below). Previously, they used their own clothing to
work in the fields and with bare feet in waterlogged areas risking contracting
Bilharzia. This is one of the reasons why the Trust decided to extend the
clinic at Kasinthula whose main function was treating Bilharzia patients.
Smut rougers in their protective clothing
The wages have also improved recently. It used to be MK138/day (US$1) but
it has now been raised to MK210/ha (US$1.5) since May 2009. They
indicated that this was most likely as a result of Fairtrade Premiums since the
cash flow of the company has also improved with the 30 percent of Fairtrade
Premium that is allocated to it each quarter for field operations that therefore
doesn’t have to come out of KCGL funds.
The workers have a workers committee but they indicated that it is not a very
helpful organization. There is no labour representation on the SVCGT or
KCGL Boards. The labourers are in the process of forming a Union through
the Sugar Plantations and Allied Workers Union.
They said that after a lot of complaints, this year (2009) they have managed
to buy protective clothing.
Workers were given MK4,000,000 (US$28571) in May 2008 as a revolving
fund which is used for any purpose such as household purchases, small
capital investments such as livestock, small items of equipment etc. The
ceiling that an employee can get from the revolving fund is determined by
their monthly wage to ensure repayment. So far, this is working very well.
In January 2009, during the hungry period when maize is scarce and prices
too high for most of the workers to afford, a total of 536 workers were given a
bag of maize each. The cost of each bag at this time was MK4200 making a
total cost of MK2,251,200 (US$16080).
43

The workers have requested the Premium Committee to consider topping up
their revolving fund with a further MK2,000,000 (US$142855)
Since the workers work in waterlogged areas and the risk of contracting
Bilharzia is very high, the Premium Committee bought Bilharzia medicines in
2008 worth MK2,000,000 (US$142855). All the workers were tested for
Bilharzia and each one who was found with it was treated at the clinic at
Kasinthula which is now undergoing expansion.
44

8.5 Changes in local, regional and national development
There is good integration with village, area and District level development through the
Village Development Committees, the Area Development Committees and the
District Assembly. The Traditional Authorities are formally represented (through their
Chiefs) on the Community Development Committee, and also through the ownership
of the sugar cane land.
The use of Fairtrade Premium is discussed with the authorities listed above, and nonsugar
farmers are also consulted on the use of the portion of Fairtrade Premium
allocated to community development. Thus non-members benefit from the Premium
projects such as clean water, electricity, and environmental projects such as tree
planting. The family in the photo below moved into the area from outside. They grow
crops and livestock and brew beer. They feel they are more food insecure than
members, they have no regular income or irrigation from their crops. They have no
electricity, but they do benefit from clean water from the borehole put in using
Fairtrade Premium. They are also consulted on community use of Fairtrade
Premium.
As an example Chinangwa village is in the process of being transformed, with water
supply, electricity supply and upgrading of the houses as seen in the photo below. As
stated by David Phillips in his report from 2008 (see Annex 6): “A large percentage of
farmers live in the village of Chinangwa which was seen to be in most need of
development project assistance. By 2008 electricity infrastructure [funded exclusively
from the Fairtrade Premium] had been built but at that time was not yet being
supplied to houses. This rationale for funding this project was that this village is
located inland whereas many other villages are located close to the main road where
electricity infrastructure already existed”. It is heartening to see the continued
advance in facilities in the village since that time.
The substantial incomes received by producers (which includes a 40% share of the
Fairtrade Premium as in-kind benefits to farmers) contributes to the economy of the
area, and KCGL also provides direct employment for a substantial number (992 in
2006, reducing to 460 in 2010). This rural area has few other employment
opportunities.
The farmer is to move from the current grass-thatched
house on the right to the one on the left which is about
to be rooved with iron sheets.
45

T
Electricity supply at Chinangwa village
The success of Fairtrade in Kasinthula makes it more likely that the other smallholder
sugar scheme at Dwandwa will also consider becoming Fairtrade certified.
8.6 Changes in the management of natural resources
The area has suffered from natural resource degradation – and is characterised by a
lack of mature trees and declining soil fertility. Tree planting is underway. Each
village has established tree nurseries with technical support from an International
Development organisation who have received funding from the EU to build capacity
of the farmers. Funds for the establishment of the nurseries are from the 30% of
Fairtrade Premium meant for development projects in the area.
The International Development organisation is also organizing trainings for making
of San Plats (latrines) and fuel saving stoves.
It is reported that the drilling of boreholes in the villages has resulted in reduction of
water-borne disease outbreaks in the area. In addition, anecdotal evidence is that
some people used to be caught by crocodiles when fetching water in the rivers
mainly during the rainy season. This has reduced as a result of the boreholes that
have been drilled in the area. No figures were available.
46

9. Improving impact
9.1 Producer standards
The Table below summarises the extent to which KCGL complies with FLO generic
standards for producer organisations.
Table 9.1 FLO International generic standards and support mechanisms for small
producer organizations 13
STANDARD COMPLIANCE BY KASINTHULA
1. Social development
1.1 FT adds to development Development strategy in place (EU, Phase III)
1.2 Members are small producers Members cultivate 2.5-3ha
1.3 Democracy, participation and
transparency
1.4 Non-discrimination None observed
Committee structures in place. Further training
needed.
Good democratic procedures.
Participation (e.g. General Assemblies) is good
Participation of village, Traditional and District
authorities is good
Still room for some improvement in transparency
by the Company Board and by Illovo
2. Socioeconomic development
2.1 Fairtrade Premium Substantial and increasing Fairtrade Premium
being received and apportioned between
ploughout and renewal; farmers livelihoods and
community development.
Concern that members are profiting too much as
individuals from Fairtrade Premium, but this will
reduce as dividends start from Company profits
Concern that labourers do not benefit as much
from the FairtradePremium despite their revolving
2.2 Economic strengthening of the
organisation
3. Environmental development
3.1 Impact assessment, planning
and monitoring
fund.
Difficult to see how the organisation could go further
up value chain. Only possibility is if other cane
products are developed (fibre, biomass, ethanol…)
Have not seen an impact assessment, but as EU,
World Bank are involved in the KCGL scheme it is
assumed that such measures are in place if needed.
3.2 Agrochemicals Prohibited chemicals such as paraquat have been
eliminated
3.3 Waste Not an issue
3.4 Soil and water Soil fertility decline is an issue in the area; being
tackled through the use of fertilisers and
reforestation
Irrigation from the Shire river for sugar cane, and
(for members) also for food crops. Non-members
suffer from droughts and consequent poor food
security
3.5 Fire Cane is burned. In future this may not be allowed.
3.6 GMOs Not an issue.
13
http://www.fairtrade.net/fileadmin/user_upload/content/Jan_2009_EN_Generic_Fairtrade_Sta
ndards_SPO.pdf
47

4. Labour conditions
4.1 Employment policy Gender policy not seen.
4.2 Freedom from discrimination No discrimination
4.3 Freedom of labour Both employers and employees are aware of the
4.4 Freedom of association and
collective bargaining
regulations. No forced, bonded or child labour
The workers have a workers committee but they
indicated that it is not a very helpful organisation.
They are in the process of forming a Union through
the Sugar Plantations and Allied Workers Union.
4.5 Conditions of employment Conditions are at least to national minima.
4.6 OHS Improving for labourers, but still room for further
improvement
9.2 Trader Standards
The FLO generic trader standard principles 14 have been entered into Table 9.2
below, and the extent of KCGL compliance is noted.
Table 9.2 FLO International generic standard principles for traders
STANDARD COMPLIANCE WITH STANDARD
Pay a price to producers that aims There is no Fairtrade minimum price for cane sugar.
to cover the costs of sustainable This was not mentioned as an issue
production: the Fairtrade Minimum (http://www.fairtrade.net/fileadmin/user_upload/content/
Price
010110_EN_Fairtrade_Minimum_Price_and_Premium_
Table.pdf )
Pay an additional sum that The Fairtrade Premium is US$60/mt made sugar. This
producers can invest in
has been paid direct to KCGL from 2004-present
development: the Fairtrade
Premium.
Partially pay in advance, when Illovo Sugar (Malawi) provide an advance on a quarterly
producers ask for it.
basis which provides producers with a steady income
throughout the year.
Sign contracts that allow for long- There is a 25 year contract in place between KCGL and
term planning and sustainable Illovo Sugar (Malawi)
production practices
Traceability It is impossible to distinguish Kasinthula sugar from
estate sugar as it is all processed together. This was
explained at certification and accepted. There is no
significant difference in quality characteristics between
Kasinthula and Ncholo estate sugar.
9.3 Organisational support and business development
There is good support to the Trust from TWIN in terms of organisational training of
the different Committees. These are reported under Section 6. Training support
(particularly on technical matters) is also available from Illovo. Members also visited
Hong Kong, Uganda and South Africa for Fair trade events, and some expect to go to
South Africa for certificate level training in sugar cane technology in 2010. Other
managers were sent for staff development training in 2009. The TWIN Producer
Partnership Programme has been trying to understand the supply chain challenges
14 http://www.fairtrade.net/generic_trade_standards.html
48

and their solutions in order to improve their business situation. First TWIN had to
understand the complex situation (in particular the status and implications of the set
of loans being borne by KCGL, and the trading relationship with Illovo), and then to
get the KCGL/SVCGT to understand and be able to do something about the various
disadvantages they are having to battle against in order to make a profit on their
sugar production. This was done through a course on “Understanding Kasinthula’s
Business” with the two Boards (KCGL and SVCGT) and the various committees. The
actual marketing of sugar is done by Illovo, although this has a direct impact on the
profitability of KCGL.
The EU has very substantial funds allocated for training (especially of farmers) which
will start shortly.
As reported in Section 6.3, some of the smaller sub-committees have received no
training and are doing their job with little or no guidance. They need training and
support urgently.
9.4 Networking
There is limited networking with other fair trade organisations. One of the Trust Board
members, , is also a COFTA representative. Members have also attended Fairtrade
events in Hong Kong, Uganda and South Africa and the UK. There is also contact
with the FLO-liaison and auditing staff. Networking has increased the confidence of
KCGL staff that they have a product that is sought after in international markets,
giving them bargaining power with Illovo.
49

10. Key indicators to be monitored over time
This study is a longitudinal study of the impact of Fairtrade on smallholder
producers and company labourers. It is intended to monitor the changes (positive
and negative) brought about by certification and engagement with the Fairtrade
labelling system over 4 years. A set of simple and measureable indicators has
been identified that can be used to monitor the changes in economic, social,
environmental and organisational impacts attributable to Fairtrade labelling and the
use of the Fairtrade Premium over time.
Where possible these indicators are:
- Impact indicators – otherwise output indicators
- Measureable/assessable by the Producer or Worker Organisations
- Attributable to Fairtrade inputs
- Supplemented by the 2-yearly impact studies (2010/2012) that will add depth
to the evidence collected by the ongoing monitoring
The 2009 situation, together with the qualitative narrative and quantitative data
contained in this report, provides a baseline that can be updated and compared in
the monitoring visits scheduled for 2011 and 2013.
As described in Section 6 and Table 6.1, TWIN has also developed a set of
indicators, primarily for following the business status of KCGL. This monitoring has
been in place since 2008, and could also act as a baseline for the overall KCGL
situation.
Table 10.1 Indicators for monitoring progress of the Producer Organisation over time
Indicator 2009 situation 2011 situation 2013 situation
ECONOMIC
Cane yield/ha Low: 94mt/ha
Farmers cane field Poor, but improving
management
KCGL profits Zero (no dividend)
Proportion of 40%
Fairtrade Premium
going to support
farmers livelihoods
SOCIAL
Relationship between
farmers and KCGL
management
Proportion of
Fairtrade Premium
funds going to
community
development projects
Extent to which
labourers benefit
from Fairtrade
Ratio of labourers to
farmers
Was poor; recently
improving
30%
Revolving fund of
MK4million;
protective clothing;
wages MK210/day; 1
bag maize for 536
workers; treatment
for Bilharzia
March 2010: 460
permanent
50

Number of families
receiving money
specifically to pay
school fees from the
40% of Fairtrade
Premium received as
in-kind payments to
farmers
ORGANISATIONAL
Capacity of Trust
committees/subcommittees
to
perform their duties
ENVIRONMENTAL
Number and type of
environmental
projects funded from
Fairtrade Premium
labourers:282
farmers
224 out of the 282
families
Some subcommittees
have not
received training and
are operating blind
1 (tree nurseries in
villages)
51

11. Conclusions
Fairtrade certification was gained by KCGL in 2004. While KCGL was already
successful and benefitting farmers with a stable income, certification has brought a
number of additional benefits, with only limited disadvantages:
Benefits of Fairtrade:
• The amount of Fairtrade Premium has been increasing year on year and
substantial sums of money have been well managed
• Individual members have benefitted from the 40% farmers livelihoods
component of the Fairtrade Premium. This has assisted significant
diversification of incomes into small businesses, cattle ownership and crop
cultivation
• Individual producers and labourers are benefitting from separate revolving
funds that enable them to access credit
• KCGL as a whole is benefitting from the 30% of Fairtrade Premium allocated
to ploughout and renewal of cane fields that should lead to improved yields
and therefore improved profitability
• Communities, including non-members, are benefitting from the 30%
community development and environmental uses of Fairtrade Premium
• Company and Trust officials have received numerous trainings and attended
Fairtrade events outside the country
• There are functioning democratic structures in place (Committees, General
Assemblies and the start of a Workers Union)
• Food security for producer households is good and living conditions (housing,
services, household durables) are improving due to the good levels of income
and use of Fairtrade Premium
Challenges:
• The high proportion of Fairtrade Premium going directly to members (as the
farmer’s livelihoods component) creates dependency. It is hoped that as the
Company becomes more profitable, the Fairtrade Premium payments (in
kind) will be replaced by Company dividends.
Concerns not attributable to Fairtrade
• A combination of management failures and free-riding by farmers led to the
situation where field husbandry declined leading to low yields and consequent
low profits. Yields need to be brought up from the present 94t/ha to over
100t/ha. This is being tackled vigorously by the new KCGL Management and
staff. However, mechanisms to overcome the free-riding of farmers (who get
an equal share of advances and Fairtrade Premium) are still to be instituted;
• The large debts borne by KCGL have created a situation where it is
impossible for the company to make a profit. Revenues from cane sold to
Illovo do not cover the repayments. In order to become a profitable company,
yields of cane need to rise towards those attained on the Illovo plantation
(through ploughout, better weeding, better irrigation and use of fertiliser),
labour use needs to be further reduced (by farmers taking greater
responsibility for field operations), dis-incentives need to be removed that
lead to free-riding farmers (at present all farmers receive the same advance
and in-kind payments), the area under cane needs to be expanded to benefit
from economies of scale (this is being addressed through Phase III), and the
debt situation needs to be reduced as far as possible (through pressure on
Illovo);
• The number of labourers employed on a permanent basis is cause for
concern. Although the situation has improved, the ratio was still 460 labourers
52

to 282 farmers in March 2010. These permanent labourers do not receive a
fair share of the benefits of Fairtrade. A disproportionate share goes to the
282 farmers.
• There are only 282 farming households in KCGL at present, out of the
catchment area of 13 villages. This has inevitably led to inequality of incomes
and food security between those in and those outside the KCGL member
families. This is only partly mitigated by community development projects
under the Fairtrade Premium.
Future Prospects
• The EU project is developing Phase III and putting significant amounts into
capacity development
• The situation of the labourers engaged on KCGL activities seems to be
improving, with a realisation that they should get a larger share of the benefits
(from the sale of sugar and from the Fairtrade Premium)
• Relations with Illovo Sugar (Malawi) are in general good, with healthy
interdependence and cooperation
• Relations between farmers and Company management are also improving
after a difficult period
Recommendations
• Greater clarity is needed on what the Fairtrade Premium can be used for. The
early use of Fairtrade Premium for direct cash payments to KCGL members
has now been replaced by benefits in kind to members, but this still means
that 40% of Fairtrade Premium goes in direct benefits to member families.
• KCGL needs to have greater negotiating capacity for a more symmetrical
relationship with Illovo sugar. TWIN has provided valuable support in getting
KCGL/SVCGTF to understand its own business and its debt situation, but
further training and mentoring is needed.
• The situation of labourers in KCGL in relation to their share of benefits from
Faitrade certification needs to be clarified. The labourers receive some
benefits, but not in proportion to their contribution to sugar production.
53