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Diageo Meta Abo Brewery, one of the leading beverage alcohol manufacturing companies in Ethiopia and subsidiary of global premium drinks company Diageo,

signed a memorandum of understanding (MoU) with the Ethiopian Agricultural Transformation Agency, the Oromia Regional Agriculture Bureau, and Farm Africa to support small scale farmers.

The signatories intend to establish a partnership for agricultural growth in Ethiopia which brings together the diverse expertise of these parties to develop a scalable contract farming model that connects smallholder farmers with large, dependable, commercial markets in a mutually sustainable and rewarding manner.

The partnership will focus in the first instance on developing a pilot project close to Meta’s brewery in Sebeta, Ethiopia, that is commercially and environmentally sustainable, socially inclusive as well as committed to applying the highest standards of business ethics.

The project will initially focus on the sustainable cultivation of malting barley; including other crops as appropriate in the future. Meta will pre-finance inputs for local farmers to source 1,000 metric tonnes of malting barley in the first year, with the intention of extending this relationship over a number of years based on the project’s success.

Nick Blazquez, President of Diageo Africa, said “Sustainable agriculture is a business imperative in terms of supporting our growth ambitions across Africa. We currently source about 50 percent of our raw materials locally in Africa, equating to roughly 400,000 tons of grain a year.”

He elaborated that this method provides a reliable source of income for more than 100,000 small scale farmers in seven countries and much needed investment in agricultural economies.

“It also provides Diageo with a long-term, secure and sustainable source of raw materials, reducing our exposure to increasingly unpredictable changes in availability of material, and potentially volatile global commodity markets. In the future, we aim to increase the sourcing of local raw materials to 70 percent, which is an increase of more than 30 percent from a 2007 baseline,” he added.

The company statement indicated that local sourcing is a well established inclusive model that benefits the end-to-end supply chain. “As well as providing education, investment and a sustainable source of income for small scale farmers and rural communities, local procurement acts as a catalyst for local supply chains, stimulating small businesses and broader opportunities for operators,” the statement said.

Khalid Bomba, CEO of Ethiopian Agricultural Transformation Agency, commented “We recognize that achieving transformational and sustainable economic growth and improving smallholder livelihoods requires attracting significant and responsible private investments. We therefore welcome this project as a positive step in developing agricultural capacity in Ethiopia as part of the Government’s Growth and Transformation Plan.”

Almost all beer brewed in Ethiopia is made from barley. As a result, the domestic malting capacity is currently unable to meet the demands of the breweries. Approximately 50 percent of the malt barley that the brewing industry in Ethiopia uses is imported grains.

Wondirad Mandefro, State Minister of Agriculture, said that although domestic demands are not being met, the country has a huge potential for the production of barley, as it is a very viable grain to produce in comparison with other grains being cultivated locally. “This kind of support is a good option to expand the production and meet the five year plan when the country intends to double the agricultural production by the end of the Growth and Transformation Plan,” Wondirad said.

“For us it makes absolute business sense to source locally. It’s an additional resource when considering volatile commodity markets and foreign exchange rates. It’s also consistent with the government’s intent to reduce the reliance on imports and encourage the growth of agriculture,” Diageo’s official concluded.