Issue 2, 2012. April-May

   

HUNTING FOR GARLIC

Monica Ellena

(The article was edited to reflect a change in the cost of running a greenhouse).

Vampires are back in fashion, even in Tbilisi: the Twilight saga films proved a smash-hit, while the Vampire Diaries TV-show has an avid online Georgian fan-base. But the country would fare poorly if confronted by a real-life vampire invasion. The reason? A shortage of garlic.

Investor.ge talks to those working to improve the agricultural sector to explain why Georgia relies on imports for garlic and other agricultural products that we could produce locally. We also look at what is being done to rectify the problem.

Garlic spices up most Georgian dishes; it is a natural antibiotic and has strong antioxidant qualities, yet Georgia doesn't grow enough to feed its habit.

From 2008-2010, the average import quantity was 1,000 tonnes with a value of $900,000. Imports peak in February, when - as your correspondent found - buying garlic can prove very difficult.

"Garlic productivity could be easily doubled through improved production practices and the availability of machinery and tools," says Lasha Dolidze, Agriculture Sector Deputy Component Leader at the USAID-funded Economic Prosperity Initiative (EPI).

"This coupled with the expansion of production area, and an increased area with adequate quality assembly points and storage infrastructure could provide the opportunity for substituting imports and increasing exports."

Reversing import trends

Garlic is not alone: low productivity and weak competitiveness are significant problems across the whole of Georgian agriculture. Once the Soviet Union's granary, the country now imports most of its vegetables; in 2010 these imports cost the country $26 million.

As the vision of Georgia as a major financial center, and transportation hub, fades, attention has turned back to the country's neglected agricultural sector. 53% of the population derives most of its income from farming, yet productivity has slipped to such an extent that it only contributes 9% of GDP.

A recent assessment by USAID identified modern technologies, better knowledge, greenhouses and storage facilities as the key elements that can reverse the sector's fortunes. Orchestrated efforts between the government, farmers and distributors have managed to boost particular products, such as wine. From 2008-2010 hazelnuts generated $384 million in exports, and $130 million in 2010, a number Dolidze says is "impressive."

"We work mainly with the farmers, showing them how using simple methods can improve yields. Pruning mandarins or grafting tomato plants can raise the productivity by 20 - 30%. No expensive machinery, just up-to-date field practices."

Houses of Green

In Soviet times, Georgia was encouraged to supply the USSR with fresh vegetables in the winter months. Many glass greenhouses were constructed: some were left unheated for cold tolerant green crops, while others were fully heated to support production of fruits and vegetables like tomatoes and cucumbers. However, when the Soviet Union collapsed, collective farms disappeared, the greenhouses fell into disrepair and the essential know-how disappeared.

But so much could still be achieved using greenhouses; there are currently 35 of them in Georgia, ranging from .5 hectares to eight hectares, all privately run. Heated greenhouses are extremely capital intensive: they cost an average of $100 per square meter, meaning that for a one hectare facility you face a bill of about $1 million in start up costs.

Returns can be high. Take tomatoes, for example: in the middle of the winter, Georgia imports as much as 95% of its fresh tomatoes, mostly from Turkey, even though Georgians consider Turkish imports to have an inferior flavor. A better tasting Georgian tomato will command a price that is at least 25% higher than a Turkish one.

"Growing tomatoes in greenhouses with the proper know-how can lead to impressive results. We estimate that profit margins for tomatoes in Georgia are the second-highest in the world," says Dolidze. "We can facilitate the investments and provide all the necessary training, including a greenhouse knowledge center in the village of Misaktsleli where we train farmers, investors and agronomists."

Training is essential: without the proper knowledge, crop yields will not be sufficient to give the rate of return needed by the investors and lenders. Running a greenhouse requires great discipline: the heating system must be carefully controlled and farmers must know what, when and how to spray. They also need to keep an eye on the market, to know exactly when prices peak, for example.

Investment opportunities

For David Shervashidze the future is bright, as Georgia has "tremendous" opportunities. First Minister of Agriculture following the Rose Revolution, now advisor for the Washington-based investment firm SEAF, Shervashidze is an agronomist and a farmer himself.

"Better knowledge means better orchards," he says. "And better knowledge also means a radical improvement in the value chain after harvest to reduce the shrinkage further down the chain. The average garlic yield in Georgia is between 7 and 12 tonnes per hectare; in Europe the average is between 35 and 40 tonnes. It's not better land, it's just better farmed and better fertilized."

That means marketing: farmers need to know what the market needs, what is the potential and what can stimulate investors' interest.

"Take cauliflower. We are net importers, but the crop grows under conditions very similar to those of cabbage, of which Georgia is a net exporter. Here you go, an opportunity right there to be grabbed."

There are also opportunities in some of Georgia's more isolated areas. A report by CHF International determined that collecting herbs and wild berries alone can account for earnings ranging between $120 and $1200 per season.

"Herbs are a totally unexplored field," stresses Shervashidze. "The potential in medicine and cosmetics is big and it will give a boost to Georgia's poorest, high mountain regions."

Advising a firm fishing for good investment opportunities Shervashidze points at small and medium enterprises. The example is the experience in Italy and Spain where SMEs are the backbone of a profitable agricultural sector where marketing plays a vital role and the involvement of the government is key.

So, where to fish for opportunities?

"Apart from vegetables, meat production, mainly pork and sheep which now we mostly export alive, then honey and fish. But also logistics, like collection and storage centers; there is huge potential as there are [currently] just a few."

The much-needed storage facilities to assure a constant flow to the market are starting to pop up though: three big ones, all privately owned, have recently been completed: two in Lilo, one in Orkhevi with a total capacity of 24,200 tonnes.

As access to credit remains difficult for small farmers, an alternative seems possible.

"Equity funds are yet another tool," believes Shervashidze. "Unlike commercial banks, equity funds are interested in the small scale, the small companies. They have a long-term vision and have an interest in a good performance as they participate in the company's capital."

Until Georgia produces more garlic, Georgians who fear blood-sucking vampires will have to settle for foreign imports.