The sustainability of a three-year multimillion-dollar project to stimulate commercial agriculture in Mozambique will be tested when the government withdraws its financial backing in June 2008.

Mozambique's annual growth rate of more than seven percent in recent years has been feted as a southern Africa success story, but it has been achieved on the back of industry while more than two-thirds of the country's 21 million people reside in rural areas, scratching a living from subsistence farming.

About 98 percent of all farming is practiced on small plots and the yields per hectare are lower than regional averages. A 2005 study found that only about four percent of farmers used fertiliser and only six percent applied irrigation techniques.

Nearly two decades of war followed independence from Portugal in 1995. In the late 1980s the country embraced free market reforms and put in place development strategies.

But a recent United Nations Development Programme study criticised these for not being "pro-poor", while contending that since the civil war ended in 1992, agricultural growth had only bounced back to pre-war levels, with no substantial productivity improvements.

In an attempt to address rural development, a pilot project, the Programme for Agricultural Market Support (PAMA in Portuguese), was conceived by the government in September 2001 to help smallholder farmers access the formal economy.

Funded by a US$3.8 million injection by the Mozambican government and a US$23.6 million loan from the United Nations International Fund for Agricultural Development, the project aimed to create a sustainable network of farmers and rural traders that would become independent in a three-year timeframe.

About 230,000 households in the northern provinces of Cabo Delgado and Niassa and the southern province of Maputo would benefit.

PAMA's project coordinator, Rui Ribeiro, using Maputo Province - where the capital, Maputo, is located - as an example, explained to IRIN the problems faced by small-scale producers and how they were overcome.

"We verified that producers in Maputo were in a situation of weakness," he said. "They couldn't compete with [neighbouring] South Africa on price and quality, and they had low productivity."

Accessing the market economy

PAMA found local farmers were ignorant of their own market, access to it was generally through intermediaries, such as hawkers selling produce on the streets, and there were no organised associations to manage infrastructure and implement regulations.

Ribeiro said PAMA conducted surveys to identify potential markets, products and buyers to determine "within the gamut of producers what are the products that will earn the most money? What do the buyers demand of producers? What are the best seed varieties?"

Armed with this information, PAMA began teaching small-scale farmers about irrigation systems, how to write business and production plans, become familiar with market prices, and run a farm in harmony with market demands.

Producers began cutting out the middlemen by negotiating directly with big buyers like the local branch of South African supermarket chain Shoprite/Checkers, the Maputo Central Hospital, and various hotels.

This has led to a change in fortunes for PAMA's small-scale farmers: companies are purchasing between 25 and 50 percent of participating farmers' produce, while the remainder is sold to local markets.

"Other programmes would invest in something like irrigation but not teach producers how to manage the system. They had no connection with the market," said Ribeiro. "We have achieved rapid results, with little dependence. Farmers now understand the market; they understand what the market needs and what they can be capable of producing."

Pine Opperman, Shoprite's operations manager in Mozambique, told IRIN that when the supermarket chain set up shop in Mozambique 10 years ago, the store was importing all its produce from South Africa. PAMA proposed that the supermarkets source from their farmers and Opperman agreed to give local producers a chance.

"They [PAMA farmers] were far ahead of other farmers in the area. Most people didn't even use proper fertiliser, they would just move [to new land] every year," said Opperman.

"It's a lot easier and a lot more reliable - knowing that I can get the quantity I ordered. It's not just somebody on the side of the road." He said sourcing from local producers represented a 45 percent saving on the cost of imports from South Africa.

PAMA's marketing director, Mario Quissico, said the farmers also valued working in the formal sector, as it provided consistent demand and pre-established prices for produce.

The challenges of remote rural areas

Anibal dos Anjos, PAMA's provincial coordinator, told IRIN that in the more remote provinces of Cabo Delgado and Niassa the initiative placed greater emphasis on educating rural traders, as producers were faced with a different set of problems.

"There were weak connections to the market, an absence of organised groups, poor road access, no rural credit to speak of, a weak trading market, very little dissemination of information about markets, low literacy and very low academic levels," Dos Anjos said.

PAMA offered classes in stock and business management, helped traders to organise associations and unions that would give them greater access to credit, while working with provincial public works departments addressed the problems of infrastructure by improving roads and rail links.

In cooperation with Radio Mozambique, the medium most accessible to rural farmers, local journalists were trained to inform listeners of price fluctuations in cash crops like cotton and tobacco.

"The essence of the programme wasn't production but commercialisation," said Dos Anjos. "We now move approximately 1,000 tons of products, representing significant financial returns, and we support 204 associations and 14 unions of farmers and traders."

The programme helped Daudo Saïde, a rural trader in Niassa Province who buys and sells agricultural products and seeds. "My business was at a very low level. I was doing general commerce at the central market and had very little capital."

He became a licensed trader, opened a bank account and participated in PAMA's classes in business planning, accountancy, warehousing, and controlling stock and output. "Now I have a vision for my business," he said. "I feel like I'm at a more stable level."