Agriculture is vital to Georgian economic activity, 43% of the country’s labour force is engaged in agricultural work, with a majority of farm workers being considered to be self-employed. However, farm workers only earn about 61% of the national average wage, and in rural areas, alternative sources of employment are scarce. The result is that many of those employed in Georgia’s agriculture industry are at risk of poverty. According to a 2014 UN report, only 11.6% of Georgia’s national income in 2014 came from selling agricultural produce, and this unexpectedly small number indicates that most of Georgia’s agricultural production takes the form of subsistence farming for own consumption.
However, in Georgia, agriculture is a staple of the social, economic and political climate; it is an industry with vast untapped potential.
The south Georgian Regional Economic Development (RED) programme was launched in 2012, ran until 2017 and was jointly funded by the Swiss Agency for Development Cooperation (SDC) and the Danish Ministry of Foreign Affairs (Danida).
In the RED project, NIRAS took the M4P (“Making the Market Work for the Poor”) approach and focused on improving the value chains in the potato, dairy and meat sectors, with the goal of reducing poverty in the Samtskhe-Javakheti and Kvemo Kartli regions. In addition, RED put a priority on food safety and animal welfare, as well as encouraging women’s involvement in the programme’s activities to increase the potential of female-driven entrepreneurship in the agricultural industry. Thus, the project responded to Sustainable Development Goals 2, 5 and 8.
The project focused on providing support and guidance to stakeholders in the target sectors. Forms of support included trainings to improve various stages of the potato value chain (which reached almost 6581 stakeholders); technical assistance to 850 farmers, service providers and processors in the dairy sector; and guidance in the marketing of potatoes, meat, and dairy products.
Another key aspect of RED was focused on stimulating private direct investment in the potato, dairy and livestock sectors. This was done through two mechanisms: a secured-lending facility (which allowed favourable rates by paying in an additional security on a loan in order to decrease the bank’s risk) and a co-investment fund.
Some of RED's results:
- The secured-lending facility made it possible for farmers to obtain a loan for EUR400,000 to import elite seed potatoes. As a result of this upgrade in their seed potato stock, these farmers saw an increase of EUR 1.5M in their combined net income.
- Due to the RED programme’s activities, about a further 1,600 market players copied or partially copied the business models that had been adopted by RED beneficiaries, resulting in an additional investment to an estimated value of EUR 1.7M.
- The average yield of RED beneficiaries’ seed and ware potatoes increased to 39 tonnes/hectare by October 2017, while production costs were lowered by approximately EUR 40 per metric tonne. To handle this produce, RED was instrumental in the establishment of seven storage areas with a total capacity of 4,500 metric tonnes and eight packing and grading centres with a combined processing capacity of 40 metric tonnes per hour.
- This increased capacity enabled import substitution to take place within the local market. Georgian potato chip manufacturer FRIXX’s percentage of locally sourced potatoes used in its production went from 0 to 80% within three years.
- The RED supported 56 diary producers in establishing an unbroken cold chain delivery system from farm to store. It also helped 56 dairy producers meet Georgian safety standards. This improvement in infrastructure enabled the farmers to bring 26 new dairy products to market, and this resulted in a 55% increase in sales revenues.