Attachment J.8 - 72011423R00010 - USAID Agriculture Program PY1 to PY4 Annual Reports.pdf

Prepared for review by the United States Agency for International Development under USAID Contract No72011418C00001, The USAID Agriculture Program implemented by CNFA. This report was made possible by the support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of CNFA and do not necessarily reflect the views of USAID or the United States Government.

Project Year One Annual Progress Report

P a g e 2 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

The USAID Agriculture Program

Project Year One Annual Progress Report September 24, 2018 – September 30, 2019

USAID Contract 72011418C00001 Implemented by CNFA

Submitted to:

USAID/Caucasus Mr. David Tsiklauri, COR

Submitted on October 31, 2019

Resubmitted on November 10, 2019

Approved November 13, 2019

P a g e 3 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Table of Contents Acronyms

Executive Summary

Lessons Learned in Project Year One

Overview of Project Year One Activities

1. Value Chain Prioritization and Gap Assessment

2. Cost-Share Grants to MSMEs, Cooperatives, Service/Information/Extension Providers and Associations

2.1. Grant Processes and Training

2.2. In-kind Grants to MSMEs and Cooperatives

2.3. Capacity Building Grants to Service/Information/Extension Providers

2.4. Capacity Building Grants to Associations

3. Technical Assistance to MSMEs, Cooperatives, Service/Information/Extension Providers and Associations

3.1. Select Local BSPs and Build BSP Capacity

3.2. Cross Value Chain Systems Support

3.3. Selected Value Chain Assistance Program

4. Cross-Cutting

4.1. Gender and Youth Integration

4.2. Public Information and Outreach

4.3. Donor, Host-Country, and Private Sector Coordination

5. Project Management

5.1. Operations, Facilities, and Equipment

5.2. Staffing

5.3. International Subcontracting

5.4. Monitoring and Reporting

5.5. Environmental Compliance

Special Initiatives

Financial and Expenditure Summary

Key Constraints

Annex 1 – Projects Approved under Non-Grantee TA Program

Annex 2 – PMP Report

P a g e 4 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Acronyms ACDA Agricultural Cooperatives Development Agency APMA Agriculture Projects Management Agency AR Autonomous Republic ARDA Agricultural and Rural Development Agency BMSB Brown Marmorated Stink Bug BRC British Retail Consortium BSP Business Service Provider CNFA Cultivating New Frontiers in Agriculture COR Contract Office Representative DQA Data Quality Assessment EBRD European Bank for Reconstruction and Development EMMP Environmental Mitigation and Monitoring Plan EOI Expression of Interest ERC Environmental Review Checklist FAA Fixed Award Amount FAO Food and Agriculture Organization FSC Farm Service Center F2F Farmer to Farmer G4G Governing for Growth GCCA Global Cold Chain Alliance GOG Government of Georgia ICC Information-Consultation Center IFS International Featured Standards IGF Import Goods Fair MEL Monitoring, Evaluation and Learning MEPA Ministry of Environmental Protection and Agriculture of Georgia MoESD Ministry of Economy and Sustainable Development of Georgia MOU Memorandum of Understanding MSME Micro, Small and Medium Enterprise NFA National Food Agency NOP National Organic Program PERSUAP Pesticide Evaluation Report and Safer Use Action Plan PMCG Policy and Management Consulting Group PPP Public-Private Partnership PY1 Project Year One PY2 Project Year Two RFA Request for Applications RFQ Request for Quotation RFP Request for Proposals SCRA Scientific-Research Center of Agriculture SEEDEV The South-East Europe Development Organization SOW Scope of Work SP Sole Proprietor TA Technical Assistance TOC Terms of Cooperation USAID United States Agency for International Development USDA United States Department of Agriculture VC Value Chain VCAP Value Chain Action Plan WFLO World Food Logistics Organization WEE Women Economic Empowerment

P a g e 5 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Executive Summary

The USAID Agriculture Program began already having annual projections for its five-year life. The Program vision to begin the project was that in year one we would: set the Program course; establish and test operating systems and procedures; fully engage all Program components; set Program standards; ensure a rapid technical start including awarding grants and providing technical assistance; and compile and assess lessons learned. In year one, each of these was addressed and all were accomplished.

The net result of these projected activities was that the Program began quickly and maintained a fast pace. But while traction was sought early by Program management, the by-words were rapid but not reckless, rapid but responsible. A by-product of this was that numerous lessons were learned in the first year which proved to be invaluable guides in designing the Year Two Work Plan. Note that drawing substantive lessons learned from every year of implementation remains a fundamental Program principle.

Thus, Program experience in year one led to 13 lessons learned that contributed to the plan of action for the second Program year.

A major result emanating from this rapid but thoughtful Program launch is that even though the Program now begins only its second year, we are aware of some specific Program thrusts that can prove to be transformative or “game-changing” within the agriculture sector. Another substantial result of first year Program experience is the conception, design, and acceptance of a new and promising type of activity aimed at identifying and supporting agriculture innovations. Appropriately, these will be called innovation grants.

These unique and unanticipated program thrusts derive from yet another lesson learned in the first Program year. That is that donor projects must raise their expectations of the pace of agriculture development in Georgia. This must include insistence on higher standards, seeking higher-level technologies, and abandoning incremental approaches. The second and succeeding Program years will incorporate this orientation.

First year Program experience provides further support for seeking higher-impact goals beginning in year two. Program management now is highly confident that all deliverables called for in the original Program design will be met fully by end of project life. This leaves scope for the Program to achieve impact beyond that initially envisioned. Broader and deeper impact to be attained as a result will be clarified and refined in the course of Program Year two.

P a g e 6 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Lessons Learned in Project Year One A rapid program start-up, as called for in the USAID Agriculture Program’s contract, followed by full implementation of both major program components, generated significant early experience. This, in turn, gave rise to a number of key lessons learned about the Program content and the implementation environment. A list of key facts and lessons learned follows:

In light of implementation in PY1, it is increasingly important to adopt higher standards and increase product quality in order to compete domestically and internationally. Demand for higher quality products is growing domestically at a notable rate. Consumers are demanding them at the local level for their families. Thus, certification is becoming a more requested and important program component. This reflects a growing level of sophistication in both Georgian producers and consumers, in addition to continued growth at the export market level. Interest in raising product standards is increasing across the entire agriculture sector. This reflects an increase in public demand for quality products and the achievement of a higher level of sector development.

Supporting the production of old varieties of various products only hinders the development of the agriculture sector. New and improved varieties must be emphasized especially in nursery development, but also in all activities that produce crops and products. The USAID Agriculture Program should not support old varieties and should encourage Agricultural and Rural Development Agency (ARDA) and other development organizations to adhere to this principle.

Getting new/improved varieties affordably into the hands of smallholder farmers represents a significant challenge.

In most market-based grant programs, there will never be enough budget to meet the demand for investment grants. This enables the USAID Agriculture Program to insist that the primary qualification for selecting grant applicants must be the submission of a sound investment proposal. Selecting the best investment proposals is more important in the long-run than ensuring an even distribution of grants among the seven VCs. The private sector market may reveal that the most promising investment proposals concentrate in certain locations or technical disciplines.

As is the trend in advanced markets, organic production is growing in popularity and in demand.

The same is true but to a lesser extent domestically. The USAID Agriculture Program’s organic production study revealed that the European Union has the highest and strongest demand for organic products.

In seeking, evaluating, and selecting investment grant recipients, entrepreneurial skills are equally or more important than technical skills, underlining the fact that success of the USAID Agriculture Program and agriculture sector in general depends on actions taken by the private sector entities.

The Program’s Grants team must be attuned to this and build on the dynamism of the private sector and its entrepreneurs.

The shortage of technical knowledge when and where it is needed in Georgia is the second biggest obstacle to agriculture development, the first being small land plot sizes. While it is not specifically addressed in the USAID Agriculture Program’s Scope of Work, it is so significant that the Program is attempting to address it directly, by launching a program with the Agrarian University to train agronomic specialists initially in berries and herbs, and eventually in all selected sub-sectors in two locations in Georgia. The Program will work in conjunction with other universities on content and venues and with private sector partners who will provide support through well-organized demonstration fields.

A particularly efficient agriculture outreach network is the Farm Service Centers (FSCs) collectively. FSCs have massive farmer outreach potential. The USAID Agriculture Program

P a g e 7 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program recognizes this and will utilize this network more fully in PY2. This will be particularly important in demonstrating and promoting new technologies.

Access to finance is a less serious obstacle to agriculture development than in former years.

Financing entities for the most part now understand that agriculture is a promising sector for investment. The matching investment grants and technical assistance provided by the USAID Agriculture Program make agriculture financing even more appealing in that they reduce the risk for lenders and increase chances of investment success through focused and rolling technical assistance.

Sub-contractors should be substantive partners. They typically are selected because they know the project field. Thus, the USAID Agriculture Program insists that a key deliverable each time a sub-contractor is called upon to perform a service is to draft the Scope of Work for the logical next assignment. This should be viewed as required and normal for a responsible implementing partner. This increases sub-contractor responsibilities but also gives them more opportunity to make substantive development contributions. The Program also will encourage sub-contractors to coordinate their activities under its overall guidance.

An important byproduct of investment grants is that they often give rise to unanticipated profit centers and/or new types of agribusinesses. Furthermore, interest in and demand for investment grants remains high. This reflects a concurrent willingness in the private sector of agribusiness owners to invest their own funds in sector-related ventures. Georgian SMEs increasingly view their country as a promising investment environment.

Geopolitical problems are ever-present. Russia is a natural and a traditional market, but events often distort that market. An important program strategy is not to replace that market but to seek alternative markets.

Branding and packaging are gaining in importance. It is increasingly evident that product presentation has a major impact on consumer behavior and decision-making in Georgia. The potential for growth in this activity is significant.

The highest value-added typically comes from exporting any agricultural product fresh. The USAID Agriculture Program will actively seek opportunities to accomplish fresh product exports.

Overview of Project Year One Activities The USAID Agriculture Program is a five-year activity that aims to accelerate the growth of agricultural sub-sectors that demonstrate strong potential to create jobs and increase incomes and revenues of micro, small, and medium enterprises (MSMEs). In particular, the Program supports the development of Value Chains (VCs) within the target sub-sectors, by assisting and strengthening relevant enterprises and organizations, through two integrated, mutually reinforcing components cost-share grants, and technical assistance (TA).

Conducting VC Prioritization and Gap Assessment early in Project Year One (PY1) allowed the USAID Agriculture Program to identify seven target agricultural sub-sectors, including berries, culinary herbs, stone fruits, perishable vegetables, pome fruits (apples), table grapes, and mandarins.

Under Component One, the USAID Agriculture Program released two Request for Applications (RFA) for its in-kind grants. The first focused on supporting nurseries, primary producers, and immediate postharvest handling enterprises in the berry sub-sector, while the second was a cross-cutting solicitation aimed at strengthening postharvest handling and cold storage links in all selected VCs. In PY1, the Program submitted 18 grant packages to USAID from both RFAs and received approval for 13 applicants, thus committing $790,778 of grant portfolio and leveraging $1,064,051 of private sector funds.

P a g e 8 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Of those, seven grantees have fulfilled part of the milestones described in their investment proposals and committed $210,719, as a matching contribution. Overall, these beneficiaries have already achieved significant results, creating a total of 162 jobs, training/consulting 521 farmers, and generating $487,345 in sales revenue.

In addition to in-kind grants, the USAID Agriculture Program released two capacity building RFAs. As a result, one of the grant recipients will diversify its services, giving local organic producers access to the U.S. organic market. Another beneficiary will obtain official status of an approved consultant in Georgia for British Retail Consortium (BRC) and International Featured Standards (IFS), enabling it to certify clients to reach higher end export markets.

Under the TA program for non-grantee agribusinesses, the USAID Agriculture Program has initiated ISO 22 000 certification consultancy for three enterprises, launched GlobalGAP certification for four berry growers, helped one grant recipient obtain GRASP certification, assisted a fruits and medical herbs processor in obtaining HACCP certification, and is supporting five enterprises in obtaining organic certification.

Improving technical knowledge of beneficiary enterprises is one of the priorities of the TA component. In PY1, the USAID Agriculture Program invited a number of international and local experts to deliver group trainings and individual consultancies to beneficiaries operating in selected VCs. The Program also actively utilized its internal technical resources to consult target VC stakeholders in different areas. As a result, in PY1, 65 enterprises benefited from individual consultancies and 295 participated in group trainings on different topics.

In PY1, with the USAID Agriculture Program’s assistance, eight berry growers attended “Soft-Stone Fruits International VC Forum” in Ukraine, five greenhouse vegetable growers went to a greenhouse study tour in Ukraine and the Netherlands, five agribusinesses took part in “Import Goods Fair” in South Korea, and three table grape growers participated in a study tour in Armenia.

In PY1, the USAID Agriculture Program hosted the world’s leading entomologists from three U.S.

universities, the USDA Research Service, and Trécé Inc. The invited scientists met Georgian counterparts and researchers within the Black Sea region to share knowledge about monitoring and the control of Brown Marmorated Stink Bug (BMSB), which threatens hazelnuts and other crops in western regions of the country. The collaborative initiatives will continue in PY2 and will include a study tour to the US to observe modern integrated pest management (IPM) systems and replicate applicable ones to manage and control the relevant pests in Georgia.

1. Value Chain Prioritization and Gap Assessment The USAID Agriculture Program’s concept is built around the idea of strengthening VCs within the target agricultural sub-sectors. For this reason, in PY1, the Program and its sub-contractor SEEDEV invested significant time and resources in selecting priority horticultural VCs, conducting competitiveness analyses of major products and product groups, and identifying gaps within the target agricultural sub-sectors.

As an initial step, the partners agreed on the VC prioritization and competitiveness assessment methodology with the USAID’s Contract Office Representative (COR). Once the methodology was approved, SEEDEV conducted the first VC analysis for the berry sub-sector and developed a corresponding

P a g e 9 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Value Chain Action Plan (VCAP). This, in turn, enabled the USAID Agriculture Program to jump-start its activities and announce the first RFA, focused on the berry VC stakeholders, in December 2018.

In the second quarter, SEEDEV conducted an extensive competitiveness analysis for a wider range of products. This was followed by VC prioritization and selection. The analysis was informed by data collected from the National Statistics Office of Georgia and public entity partners, as well as meetings and focus group discussions with different stakeholders. The results of the assessment suggested focusing on seven VCs, including berries, culinary herbs, stone fruits, perishable vegetables, pome fruits (apples), table grapes, and mandarins.

In January 2019, the USAID Agriculture Program and SEEDEV consultants met with USAID to discuss the selection process and prioritized VCs. The partners received recommendations that further informed the analysis. On February 5, 2019, the Program submitted to USAID the “Sector Selection and Value Chain Analysis” report along with Value Chain Action Plans and “Bumpers Amendment Analysis” for review and approval.

On February 15, 2019, the USAID Agriculture Program and SEEDEV organized a presentation for USAID to discuss the report together with the Program’s Year One Work Plan.

Attendees included the representatives of USAID and USAID-funded projects. In the Third Quarter, the same presentation was delivered to the Ministry of Environment Protection and Agriculture of Georgia (MEPA) and the Ministry of Economy and sustainable Development of Georgia (MoESD). Both ministries approved selected VCs and provided positive feedback on the analysis.

2. Cost-Share Grants to MSMEs, Cooperatives, Service/Information/Extension Providers and Associations

2.1. Grant Processes and Training

As one of the key guiding documents of the USAID Agriculture Program, Grants Manual was developed early in the first quarter and submitted to USAID in November 2018. The Program follows the document to manage both in-kind grants, targeted at enterprises and agricultural cooperatives, and capacity building grants, designed for sectoral and cross-cutting associations, as well as service, information and extension providers.

Key Achievements in Project Year One:

Two in-kind grant RFAs issued and 101 applications received.

13 investment grant packages approved by USAID and investment projects launched.

Five investment grant projects in pipeline and pending USAID Approval.

Two capacity building grant RFAs issued and two capacity building grant projects launched.

$789,117 in grant portfolio obligated across 13 Georgian enterprises, leveraging $1,089,095 in private sector investment.

$487,345 in new sales generated by grant recipients.

162 jobs created by grant recipients.

521 farmers trained/consulted by the grant recipients.

Presentation for the Ministry of Environment Protection and Agriculture of Georgia

P a g e 10 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

The Grants Manual was approved in February 2019. However, the USAID Program later agreed with USAID to amend the document in order to launch the capacity building grants projects. In the amended manual, the Program is no longer required to complete Environmental Review Checklists (ERCs) and develop Environmental Mitigation and Monitoring Plans (EMMPs) for the recipients of capacity building grants.

2.2. In-kind Grants to MSMEs and Cooperatives

RFA 001 – Support to Nurseries, Primary Producers and Immediate Postharvest Handling Enterprises in Berry VC: The USAID Agriculture Program’s first grant solicitation focused exclusively on berry VC and attracted 55 applicants. Prior to the submission deadline on January 31, 2019, the Program conducted seven outreach meetings to raise awareness about the grant opportunity in different regions of Georgia and provide clarifications regarding the application process and the Program’s requirements. A total of 388 people attended the meetings (see section 4.2), revealing that berry is an attractive agricultural sub-sector and that many are willing to invest in it.

The USAID Agriculture Program shortlisted 16 candidates that passed the threshold of 70 points and progressed to the site visit stage, which took place in the period of February 19

– 22, 2019. Out of 16 shortlisted applications, 12 were developed into full investment proposals and submitted to USAID, which approved all 12 applicants.

Under RFA 001, the Program will commit $716,861 as a matching grant, leveraging $946,051 in private sector investment.

Table 1. Grant Recipients Approved under RFA 001

Project Type Approved Applications Requested Amount Matching Contribution Nursery 4 $207,022 $366,692 Primary Production 3 $152,046 $207,673 Postharvest Handling 5 $357,633 $371,686 Total 12 $716,681 $946,051

Grant Recipient Nurseries Approved under RFA 001 Agricultural Cooperative Kartuli Nergebi is a recently registered nursery in Kakheti region. With the USAID Agriculture Program’s support, the cooperative plans to establish a warehouse and two fully equipped 1,000 m2 greehouses in order to produce containerized seedlings of modern blueberry and raspberry varieties. Anticipated project outcomes are as follows:

Cooperative Kartuli Nergebi will introduce three blueberry and four raspberry varieties and will enable an esimated 115 farmers to establish aroud 10 hectares of berry orchards.

P a g e 11 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Over the life of the project, the cooperative is expected to generate $212,643 from sales of blueberry seedlings and $129,390 from sales of raspberry seedlings.

The grant recipeint will create 14 jobs in the first year of the project.

Sole Proprietor (SP) Mindia Kavtaradze plans to set up a nursery to produce raspberry seedlings in Imereti region. With the support of the USAID Agriculture Program, the grantee will establish 28 units of 350 m2 greenhouses. Anticipated project outcomes are as follows:

SP Mindia Kavtaradze will create 41 jobs in the first year of the project.

Over the life of the project, the enterprise is expected to generate $402,985 from sales of raspberry seedlings and $134,328 from sales of greenhouse raspberries.

The grant recipient will train around 160 farmers in modern agricultural technologies.

Agricultural Cooperative Georgian Fruit Growers Association applied for the USAID Agriculture Program’s grant to produce high-quality blackberry seedlings in Shida Kartli region. The grant recipient plans to equip 300 m2 greenhouse with a heating system and metal shelves in order to produce rootstocks. Anticipated project outcomes are as follows:

Agricultural Cooperative Georgian Fruit Growers Association will create eight jobs.

The grantee will enable an estimated 70 small and medium-sized farmers to establish aroud 44 hectares of blackberry orchards.

Over the life of the project, the cooperative is expected to generate $75,741 from sales of blackberry seedlings.

The cooperative will directly benefit around 370 farmers by training them in modern agricultural technologies and engaging them in field days.

Mza Chitili Ltd is an experienced nursery that applied to the USAID Agriculture Program’s grant to start production of strawberry and raspberry seedlings in Kvemo Kartli region. Under the project, the grant recipient will set up a laboratory, cold chamber, and rooting room. Anticipated project outcomes are as follows:

Mza Chitili Ltd will create 13 new jobs.

Over the life of the project, the grant recipient is expected to generate $1,641,640 from sales of raspberry seedlings and $364,000 from sales of strawberry seedlings.

The company will hold regular free trainings and will reach around 400 people.

Grant Recipient Primary Producers Approved under RFA 001 SP Aleksandre Sologhashvili applied for the USAID Agriculture Program’s grant to set up greenhouses in order to produce off-season raspberries and strawberries in Kakheti region. Anticipated project outcomes are as follows:

SP Aleksandre Sologhashvili will create 13 jobs in the first year of the project.

Over the life of the project, the enterprise is expected to generate $67,344 from raspberry sales and $61,459 strawberry sales.

The grant recipient will regularly share knowledge about modern agricultural technologies with around 50 farmers.

Luri Veli Ltd is a 5-ha orchard blueberry producer in Ozurgeti municipality, Guria region. With the support of the USAID Agriculture Program, the company plans to cover two hectares with high tunnels in order to secure part of the orchard from the risks associated with unfavorable weather conditions. Anticipated project outcomes are as follows:

P a g e 12 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Lurji Veli Ltd will create 41 jobs in the first year of the project and additional 60 seasonal jobs in the second, third and fourth years of the project.

Over the life of the project, the company is expected to generate $527,500 from blueberry sales.

The grant recipient will train around 300 farmers in high tunnel technologies and will regularly arrange field days.

Agricultural Cooperative Shamatia is a strawberry producer from Khobi municipality, Samegrelo-Zemo Svaneti region that plans to renovate existing greenhouses and purchase necessary equipment, including pre-cooling equipment. Anticipated project outcomes are as follows:

Agricultural Cooperative Shamatia will create 12 jobs.

Over the life of the project, the cooperative is expected to generate $70,489 from sales of greenhouse strawberries and $41,667 from sales of open-field strawberries.

The grant recipient will individually consult farmers interested in modern agricultural technologies and is expected to reach 40 beneficiaries by Year Four of the project.

Grant Recipients Planning to Introduce Postharvest Handling Equipment under RFA 001 MNK Ltd is a blackberry producer from Tskaltubo municipality, Imereti region that plans to set up a 472 m2 facility equipped with a berry inspection table, sorting line, packaging machine, and pre-cooling equipment, as well as a short-term cold storage chamber. Anticipated project outcomes are as follows:

MNK Group Ltd will create 48 jobs in the first year of the project and an additional 80 seasonal jobs in the second, third and fourth years of the project.

Over the life of the project, the company is expected to generate $299,164 from blackberry sales.

160 farmers will be trained in berry production and postharvest handling technologies.

Agricultural Cooperative Chiri is a raspberry producer with 7-ha orchard in Vani municipality, Imereti region. Under the project, the grant recipient plans to set up a postharvest handling facility that will include pre-cooling equipment, a packaging line, and cold chamber. Anticipated project outcomes are as follows:

Agricultural Cooperative Chiri will create seven jobs.

Over the life of the project, the cooperative is expected to generate $491,324 from raspberry sales.

The grantee will share knowledge about berry production and postharvest handling technologies with at least 48 interested farmers.

SP Berdia Silagadze is a primary producer from Tskaltubo municipality, Imereti region that plans to set up eight greenhouses to produce strawberries, raspberries, and blackberries. In addition, as part of the project, the grant recipient will purchase pre-cooling equipment, a rotary tiller, and a tractor with implements. Anticipated project outcomes are as follows:

SP Berdia Silagadze will create eight jobs in the first year of the project and additional three seasonal jobs in the second year of the project.

Over the life of the project, the enterprise is expected to generate $29,287 from blackberry sales, $31,010 from raspberry sales, and $139,616 from strawberry sales.

At leat 40 farmers will be trained in berry production and postharvest handling technologies.

Agricultural Cooperative Riversons Agro is a primary producer of raspberries and blackberries, based in Kakheti region. The cooperative applied for the USAID Agriculture Program’s grant to establish a

P a g e 13 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program postharvest handling facilty that will include pre-cooling equipment, a packaging line, and a short-term cold storage chamber. Anticipated project outcomes are as follows:

Agricultural Cooperative Riversons Agro will generate around $588,651 through sales of raspberries and blackberries.

The grant recipient will create 31 jobs in the first year of the project and an additional 118 seasonal jobs in the second and third years of the project.

Agricultural Cooperative Spartaki is a raspberry producer from Vani municipality, Imereti region that plans to introduce modern postharvest handling equipment, including pre-cooling equipment, a packaging machine, feeders, and equipment for two cold chambers. Anticipated project outcomes are as follows:

Agricultural Cooperative Spartaki will create 12 jobs.

Over the life of the project, the cooperative is expected to generate $47,653 from sales of greenhouse raspberries and $1,452,618 from sales of open-field raspberries.

The grant recipient will benefit at least 40 farmers by consulting on modern production and postharvest handling technologies.

RFA 002 – Strengthening Postharvest Handling and Cold Storage Links in Selected VCs: On April 13, 2019, the USAID Agriculture Program announced a second RFA to support the development of postharvest and storage links in priority VCs. This RFA was cross-cutting and aimed to attract applicants from all target sub-sectors.

Prior to soliciting applications, the USAID Agriculture Program discussed with the

USAID’s COR the eligibility of agricultural cooperatives and correspondingly modified the RFA. As a result, those agricultural cooperatives that were registered after September 23, 2018 will be treated as agribusinesses and will be able to obtain no more than 40% of total estimated cost from the Program.

The USAID Agriculture Program conducted an outreach campaign to increase awareness about the grant opportunity and reach as many potential applicants as possible. As part of the campaign, the Program held 13 presentations and met 396 people (see section 4.2).

This RFA attracted 46 applicants intending to establish or expand the postharvest handling infrastructure. The USAID Agriculture Program shortlisted 20 candidates that passed the threshold of 70 points and progressed to the site visit stage, which took place in July 2019.

After the site visits, the Program started developing grant packages of selected enterprises. By September 30, the USAID Agriculture Program submitted to USAID six grant packages and received approval for one applicant – Agricultural Cooperative Agrostore. The cooperative produces raspberries (3 hectares) and

P a g e 14 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program persimmons (0.7 hectares) in Kvareli municipality, Kakheti region and applied for the Program’s grant to establish a facility with two cold chambers and one pre-cooling chamber. In addition to storing its own produce, the grantee will use the facility to serve other farmers based in neighbouring areas. Anticipated project outcomes are as follows:

Agricultural Cooperative Agrostore will create 154 jobs.

Over the life of the project, the cooperative is excpected to generate $69,964 from pre-cooling and cold storage services and $956,473 from sales of raspberries, pomegranates and persimmons.

The grantee will purchase fruits from around 15 small and medium-sized farmers, creating new cash markets worth $308,196.

Around 30 small and medium-sized farmers will store their produce in the applicant’s new facility and their number is expected to increase by 5% annually.

Cooperative Agrostore will train/consult around 200 farmers in berry production (including green operations and picking) and postharvest handling technologies.

2.3. Capacity Building Grants to Service/Information/Extension Providers On February 21, 2019 the USAID Agriculture Program released its first capacity building RFA to solicit applications from local organizations that offer consultancy and audit services in international food safety, organic, and social responsibility standards. The Program received three applications from companies interested in improving and diversifying their activities and selected two candidates for matching capacity building grant support:

Caucascert LLC is the only local organic certification body with international accreditation that plans to obtain accreditation in order to introduce USDA’s National Organic Program (NOP) certification in Georgia and provide local organic producers with access to the US organic market.

Once Caucascert LLC becomes certified, Georgian operators that are willing to sell organic products in the EU and US will not have to pay for two separate inspections, nor abide by two separate organic production standards. Caucascert is anticipated to obtain certification in March, 2020.

ISO Consulting LLC is one of the leading Georgian consulting companies specializing in various management system standards. The company plans to obtain an official status of an approved consultant in Georgia for British Retail Consortium (BRC) and International Featured Standards (IFS). These are one of the most demanded food safety standards in the EU. The availability of a certified local company that provides pre-certification consultancies will significantly reduce certification consultancy costs for Georgian exporters and facilitate their entry into new premium markets. ISO Consulting is anticipated to become approved IFS training provider/consultant by February 2020 and approved BRC training provider/consultant by September 2020.

2.4. Capacity Building Grants to Associations

In the first quarter, the USAID Agriculture Program met a number of sector associations to conduct an initial capacity assessment, identify gaps in their organizational structures and operations, and develop a list of potential technical areas for cooperation. The Program plans to closely cooperate with both sectoral and cross-cutting associations to implement a wide range of programmatic interventions, ensure access to more beneficiaries, and achieve broader impacts. In addition to contracting associations for delivery of training and consulting services, the Program plans to offer them capacity building grants and TA to further strengthen their technical expertise and institutional capacity and better service their members.

P a g e 15 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

Organizational Capacity Assessment of Selected Associations: On January 8, 2019 the USAID Agriculture Program announced a Request for Proposals (RFP) to conduct an organizational capacity assessment of associations and contracted its partner business service provider (BSP) – Policy and Management Consulting Group (PMCG) – to carry out the assignment. PMCG assessed 16 sectoral and cross-cutting associations engaged in the Program’s priority VCs, including the Association of Berry Producers, Georgian Berry Growers’ Association, Biological Association Elkana, Association of Horticulture and Berry Development, Export Development Association, Georgian Association of Retailers and Georgian Association of Herbs Producers, and the Georgian Association Women in Business and Union Agroservice.

Based on the findings, PMCG recommends the associations to:

1. pay more attention to basic organizational structure and various aspects of management, including human resources, financial management, membership policy, annual meetings, and accountability;

2. elaborate an effective mechanism for communicating with the members and receiving feedback and define measurable indicators of success to monitor and evaluate the activities;

3. develop proper marketing strategies to reach more businesses and raise visibility;

4. upgrade technical expertise of the staff and invited consultants to provide the members with the needed services.

Based on PMCG’s recommendations, the USAID Agricultural Program focuses on building the capacity of business associations in four main areas: (1) adopting a strategic approach to organizational development and management; (2) improving services in order to provide value to the existing and potential members;

(3) financial management; and (4) marketing strategies. The Program may engage an international consultant to facilitate the abovementioned capacity building activities.

Capacity Building Grants to Business Associations: On August 19, 2019, the USAID Agriculture Program released a second capacity building RFA to solicit applications from cross-cutting business associations.

Within the framework of this RFA, the Program offers capacity-building grants with a matching 30% contribution in the following priority directions:

Improved Access to Modern Inputs – under this direction, the Program shortlisted Non-profit Legal Entity (NPLE) Agroservice. This is a 12-month grant project, which aims at: (1) supporting agricultural inputs market stakeholders in developing better access to inputs market; (2) increasing knowledge base of agricultural extension service provider organizations in soil management; (3) increasing awareness about high quality/modern agricultural input materials and agricultural machinery; and (4) disseminating information about agricultural inputs products and machinery. The requested grant amount makes up $73,428, while matching contribution comprises $31,428.

Modern Approaches and Mechanisms to Facilitate Export of the Horticultural Commodities – under this direction, the Program shortlisted NPLE Export Development Association. The 8-month grant project aims to help the existing and potential Georgian exporters to access, absorb, and process the knowledge on export procedures and market entry regulations (tailored to concrete products and countries), strengthen linkages within respective value chains in Georgia and access supply chains of foreign markets. The requested grant amount makes up $55,400, while matching contribution comprises $24,750.

Both grant proposals are being reviewed and will later be submitted to USAID for review and approval.

P a g e 16 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program

3. Technical Assistance to MSMEs, Cooperatives, Service/Information/Extension Providers and Associations

The USAID Agriculture Program’s goal is to strengthen VCs within the target agricultural sub-sectors, by improving the capacity of its beneficiary enterprises. On the one hand, the Program provides tailored technical assistance to its grant recipient organizations, while on the other hand, the Program identifies gaps and weak links in all target VCs to support different non-grantee enterprises (VC players). Activities are designed on the basis of the needs of a specific enterprise and/or the challenges identified in a particular VC. In all cases, the Program is looking to improve access to new varieties and inputs, enable the stakeholders to introduce modern production, postharvest handling and processing technologies and improve their access to markets. In PY1, the USAID Agriculture Program’s TA activities took different forms, including individual consultancies, group trainings, field-based trainings/consultancy, study tours, GAP Analysis, support in food safety certifications, facilitation market linkages, marketing and branding support, and international trade fairs. Key achievement of technical assistance component are provided in the table below and described in details in the following paragraphs.

3.1. Select Local BSPs and Build BSP Capacity

Early in the first quarter, the USAID Agriculture Program released an Expression of Interest (EOI) seeking qualified organizations to create a pool of partner business service providers. After assessing received applications, the Program selected 28 companies that specialize in different technical areas, including modern agricultural technologies, bio production, food safety, branding, marketing and sales, organizational capacity building, business and financial management, and export promotion.

In the third quarter, the USAID Agriculture Program decided to expand the existing pool of BSPs to engage more organizations that specialize in food safety. This is one of the priority directions that is actively requested by many agribusinesses. In cooperation with its partner organizations, the Program will assist the beneficiaries in obtaining international certifications and introducing good agricultural practices and food safety management standards.

To date, the pool of BSPs includes 31 partner organizations that are available to engage in planned TA activities. In addition to utilizing their services, the USAID Agriculture Program offers BSPs an opportunity to strengthen their capacity and diversify activities through capacity building grants. In PY1, the Program

Key Achievements in Project Year One:

65 enterprises received individual consultancies in different technical areas.

295 enterprises participated in group trainings.

Cost-share ISO 22 000 certification consultancy initiated for three enterprises.

The Program conducted Gap Analysis of 13 enterprises.

The Program is assisting four berry growers in obtaining GlobalGAP certification.

One grant recipient obtained GRASP certification.

The Program is assisting a fruits and medical herbs processor in obtaining HACCP certification.

The Program is assisting five enterprises in obtaining organic certification.

Eight berry producers participated in “Soft-Stone Fruits International Value Chain Forum” in Ukraine.

Five greenhouse vegetable producers participated in a study tour in Ukraine and the Netherlands.

Five agribusinesses participated in “Import Goods Fair” in South Korea.

Four enterprises were targeted for branding support.

Three table grape growers participated in a study tour in Armenia.

In PY1, the USAID Agriculture Program’s cost-share TA activities leveraged $143,806 from public and private sectors, as well as other donor-funded programs.

P a g e 17 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program launched two grant projects (see section 2.3) and will continue to assist its partner organizations over the course of the next four years.

3.2. Cross Value Chain Systems Support

Agronomic expertise: Limited knowledge of modern technologies is one of the most pressing issues hindering the development of Georgia’s agriculture sector. With this in view, the USAID Agriculture Program met with several universities to discuss the design of an effective capacity building program that can improve farmers’ agronomic knowledge and help them adopt modern technologies and practices. The discussions produced an agreement on general approaches and required participation.

A program component that is based on specific needs identified through multiple meetings with the targeted groups of primary producers is included in the Year Two Work Plan and envisions “field-based education” at select knowledge plots through a series of two to three-day sessions, integrating theoretical and practical aspects on specific phases of the crop production cycle. These capacity building sessions will engage local and international consultants, representatives of universities and Information-Consultation Centers (ICCs) of MEPA.

Agricultural cooperatives: In cooperation with MEPA’s ARDA, the USAID Agriculture Program’s partner BSP – JSC GEC – assessed organizational capacity of 42 agricultural cooperatives operating in the horticulture VCs and developed specific recommendations for the capacity building program. Informed by the assessment and recommendations, the Program designed tailored activities to strengthen the capacity of agricultural cooperatives and increase their operational efficiency. Planned areas for TA include: improvement of general management skills for enterprise leaders, strengthening financial management and reporting capabilities, and introduction of modern marketing tools and efficient agronomic practices.

Supply Chain (Cold Chain) Management: Development of postharvest handling links within the target VCs is one of the priorities of the USAID Agriculture Program. For this reason, in PY1, the Program mapped local cold storages and met relevant stakeholders to discuss different topics, including the Supply Chain Management Model, integration of primary producers in the chain, and the main technical and logistics limitations. Later, in cooperation with the Georgian Cold Storage and Logistics Association, the Program developed the country’s brief cold chain assessment and identified key barriers and gaps in the sector. The assessment was shared with the sub-contractor – World Food Logistics Organization (WFLO) for their reference. WFLO will use the document to develop a Cold Chain Assessment Report.

In PY1, the USAID Agriculture Program engaged Global Cold Chain Alliance (GCCA) in its cold chain activities. GCCA’s team visited Georgia and met with relevant stakeholders, including ARDA, cold storage facilities, different orchards, distributors and processors, grocery chains, super markets, and local fruit and vegetable markets. Based on the collected information, GCCA developed a draft Cold Chain Model, as well as recommendations for development. The model is currently being finalized by the USAID Agricultural Program. Once the final

Visiting a cold storage facility in Agara, Kareli municipality, Shida Kartli region

P a g e 18 | PY1 Annual Progress Report Contract No. 72011418C00001 The USAID Agriculture Program document is available, it will be shared with USAID and will inform the Program’s activities in terms of supply chain development.

Access to Finance: Although there are a number of opportunities for private companies to source funding from Georgian financial institutions, it still remains a challenge for small agribusinesses. In PY1, the USAID Agriculture Program actively met with the leading financial institutions that offer agribusiness lending programs, including TBC Bank, Bank of Georgia, FINCA Bank, Liberty Bank, and Investment Fund Gazelle Finance to raise awareness about the Program’s activities, learn more about their agribusiness directions, and discuss opportunities for cooperation.

On October 26, 2018, USAID organized a meeting with the representatives of OPIC and Gazelle Fund and invited the USAID implementing partners to familiarize them with the financing tools of these institutions, as well as the criteria they use when selecting beneficiaries. As a follow-up to this meeting, the USAID Agriculture Program decided to inform its stakeholders about the opportunities with Gazelle Fund. In general, the Program’s target group of beneficiaries do not qualify for OPIC funding and do not fit well into the profile of Gazelle Fund either. However, when appropriate, the Program intends to facilitate linkage with of its beneficiaries with Gazelle Fund.

Liberty Bank expressed interest to sign Terms of Cooperation (TOC) with the Program. The management of the bank plans to introduce long-term agribusiness loan products and would like to cooperate with the Program to identify financing mechanisms and develop agricultural credit policy.

In July 2019, the USAID Agriculture Program hosted officials from Bank of Georgia, who are willing to support the Program’s grant recipients in obtaining funds for matching investment. The bank also agreed to suggest potential applicants for the next solicitation rounds.

Environmental Solutions: Organic…