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Viewing cable 09KIGALI181, PYRETHRUM: BACK TO THE FUTURE?
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09KIGALI181 | 2009-03-25 15:06 | 2011-08-24 00:00 | UNCLASSIFIED | Embassy Kigali |
P 251506Z MAR 09
FM AMEMBASSY KIGALI
TO SECSTATE WASHDC PRIORITY 5974
INFO AMEMBASSY ADDIS ABABA
AMEMBASSY BRUSSELS
AMEMBASSY BUJUMBURA
AMEMBASSY DAR ES SALAAM
AMEMBASSY KAMPALA
AMEMBASSY KINSHASA
AMEMBASSY LONDON
AMEMBASSY NAIROBI
AMEMBASSY PARIS
AMEMBASSY PRETORIA
UNCLAS KIGALI 000181
DEPT PASS TO DOC/FCS/NAIROBI JSULLIVAN
DEPT PASS TO FAS NAIROBI
E.O. 12958: N/A
TAGS: ECON ETRD EFIN PGOV EINV USAID RW
SUBJECT: PYRETHRUM: BACK TO THE FUTURE?
¶1. (U) Summary: Rwandan production of pyrethrum, a natural
insecticide that has been a key Rwandan export crop since
1937, collapsed in 2007/8 due to the country's sole refiner
mismanaging suppliers and buyers. From a peak of 1,350 tons
in 2006, production slipped to less than 220 tons in 2008.
Now under new management, the refinery is seeking to rebuild
its supply base and restore confidence with former buyers.
At current market prices of over $200 per kilo for refined
product, pyrethrum offers local and regional farmers a
lucrative cash crop. It also presents Rwanda with a chance
to expand its export base and the government a way to
increase rural employment. End summary.
What is Pyrethrum?
------------------
¶2. (U) Pyrethrum is a Chrysanthemum-related flower that
produces a powerful natural insecticide (pyrethrin) that
attacks the nervous system of insects. Among pyrethrum
positive attributes, it has little effect on mammals, does
not enter the food chain and is biodegradable. It is
considered among the safest insecticides available for uses
that involve contact with humans, animals or use around food
products. Pyrethrum is one of the few insecticides approved
for use on organic farms in Europe and the U.S. Applications
include insect repellents, flea and tick control and in
foggers in food storage areas.
Unsatisfied World Demand
------------------------
¶3. (U) According to a March 2009 report by the USAID-funded
Sustaining Partnerships to Enhance Rural Enterprise and
Agribusiness Project (SPREAD), the potential demand for
products that can be formulated with pyrethrum is huge, but
difficult to estimate due to persistent shortages that have
forced many manufacturers to switch to synthetic compounds.
Even with unreliable production, the world market for
pyrethrum is estimated at $40-50 million, only 50 percent of
which is satisfied by current production. Growing worldwide
demand for "green" products could open new markets for
pyrethrum.
Rwanda Climate Ideal for Growing
--------------------------------
¶4. (U) Pyrethrum production was introduced to East Africa
during the 1930-40's for use by the allied armies. The plant
thrives in the fertile volcanic soils, low night
temperatures, good rainfall and ample sunshine that are found
in the East African highlands of Kenya, Tanzania, Rwanda and
eastern Democratic Republic of Congo (DRC). Kenya has
traditionally been the largest source of pyrethrum,
accounting for between 60-85 percent of total world
production between 1940-2006. Australia, Rwanda and Tanzania
account for most of the remaining production. There are only
five pyrethrum refiners in the world including two in Kenya
and one in Rwanda. Experts consider the recently upgraded
Rwandan refinery to be the most efficient in the world.
¶5. (U) Ten thousand metric tons (m/t) of dried pyrethrum
flowers are needed to produce 200 m/t of refined pyrethrum
extract with 50 percent active ingredients (pyrethrins). At
optimum yields one hectare can produce 1,000 Kg of dried
flowers. Currently, refined pyrethrum sells at $200-220 per
kilo. Due to the high quality of its pyrethrum flowers and
efficiency of its refinery, Rwanda is potentially able to
Qefficiency of its refinery, Rwanda is potentially able to
produce pyrethrum with 75-80 percent active ingredients, the
highest in the world.
Poor Management/Declining Production
------------------------------------
¶6. (U) Production of pyrethrum has declined dramatically in
Rwanda (and Kenya) over the last few years. Rwandan
production declined from 1,350 m/t (of dried flowers) in 2004
to 209 m/t in 2008. (Note: Production in Kenya reportedly
declined from 2,300 m/t of (dried flowers) in 2005 to 70 m/t
in 2008. End Note). Societe de Pyrethre au Rwanda (SOPYRWA
- Rwanda pyrethrum refinery) is the only buyer of dried
pyrethrum flowers in Rwanda. Production declined largely
because farmers were not paid for their crops by the sole
buyer and as a result switched to other cash crops like
potatoes.
¶7. (U) Properly managed, pyrethrum offers a higher return to
farmers than potatoes. But unlike potatoes, pyrethrum poses
more economic risk to farmers because there is only one
buyer, the flowers cannot be consumed as a subsistence crop
and maximum yields per hectare are not achieved until the
third year of production. Farmers in Rwanda are paid $2 per
Kg of dried flowers. Currently, due to uncertain selling
conditions and poor husbandry, farmers are producing an
average of 250 Kg per hectare compared to 1,000 Kg they could
potentially produce with better land management.
¶8. (U) Financial mismanagement at SOPYRWA in 2002-2008 led
to cash shortages in the refinery, farmers not being paid,
buyers not being supplied and SOPYRWA's failure to invest in
new seed stocks, extension services and refinery maintenance.
As a result, SOPYRWA was unable to produce or ship millions
of dollars of confirmed orders to key buyers such as
American-owned Valent BioSciences, Whitmeyer and SC Johnson.
As production declined and debts accumulated, the company
faced bankruptcy.
Rwandan Refinery Under New Management
-------------------------------------
¶9. (U) In June 2008, SOPYRWA was acquired by Horizon Ltd., a
private company with links to the Rwandan government and
military that invests in distressed businesses in strategic
economic sectors. Horizon has brought in new management and
capital and is seeking to increase refining of dried flower
stock to 1,800 m/t's by 2012. At current market prices this
represents sales of $6-7 million annually and would support
an estimated 8,000 rural farm families. Sopyrwa has a
production capacity of 3-4,000 m/t (about $15 million in
sales) that could be expanded further if adequate stock of
dried flowers were available. John Zigira, CEO of Horizon,
said because SOPYRWA failed to honor commitments to farmers
and buyers, he now has to restore trust with them and rebuild
the company. Zigira admitted financing the rebuilding of
SOPYRWA remains a challenge as the company is deeply in debt.
¶10. (U) The new General Manager of SOPYRWA, David
Rwiyamirira, told emboffs that by introducing extension
services and better planing and production controls, Horizon
hopes to help farmers increase yields to over 800 Kg per
hectare by 2013 and increase the active ingredients in dried
flowers 60 percent by introducing new seedlings and better
drying stations. Horizon also hopes to tap new sources of
dried pyrethrum flowers in the eastern DRC (Note: SOPYRWA
bought 500 m/t of dried pyrethrum from the DRC in 2008 and
believes this region could be an important source of raw
materials for the refinery. End Note). Rwiyamirira agreed
with Zigira that sourcing financing has been difficult. He
noted local farmers have been fully paid for past purchases
Qnoted local farmers have been fully paid for past purchases
but the company lacks sufficient funds to invest in new seed
stocks and adequately support needed extension services.
Rwiyamirira added new financing is urgent as this year's crop
must to be planted in April for SOPYRWA to meet production
targets.
Opportunity Knocking
--------------------
¶11. (U) Comment: With Kenyan production in decline and world
demand for natural pyrethrum increasing, Rwanda has an
opportunity to take a leading position in world pyrethrum
production and sales. If it is able to build a reputation as
a reliable supplier, demand for Rwandan refined pyrethrum
could grow even further, providing lucrative income for
thousands of rural families and opening opportunities for
expanded trade with the eastern DRC. It also opens up
opportunities for possible downstream production of
added-value finished insecticide products for the regional
market.
SYMINGTON