This activity was one of the four winners of Chemonics’ recent Market Systems and Youth Enterprise Development Innovation Contest within the market systems track. This post originally appeared on Marketlinks.
It is not often that a pilot activity to improve a market system ends up capturing the imagination of a nation. Yet, when a barge loaded with 250 tons of watermelon set off in southern Ukraine on July 30, 2017, average citizens and the media tracked the barge’s every move. The pilot, performed by the USAID Agriculture and Rural Development Support (ARDS) Program, was selected as a winner of Chemonics’ recent innovation contest not because it went according to plan — in fact, anything but.
Designing the Pilot
In southern Ukraine, most of the companies growing fruits and vegetables are small enterprises with limited access to major retail markets in the north. Delivering their produce to supermarkets can be a major challenge for many, particularly during the summer. Due to a lack of alternative modes of transportation, the cost for transporting fruits and vegetables from farms in southern Ukraine to markets in the north can increase by two to two and a half times in the summer high season. Up to 30 percent of the harvest can remain in the field due to the lack of adequate transportation during the high season and another 13 percent are damaged during truck transport on poor roads.
Working with private sector partners, the USAID ARDS Program tested a novel approach to lower the cost of transporting watermelons to market using a network of river barges and waterways instead of roads. The team identified watermelons as a sample value chain due to its high demand and transportation because watermelon is particularly difficult to transport due to its bulk and potential for damage. The project partnered with 28 small- and medium-sized farms to source the fruit and a large agribusiness, Nibulon, which operates a significant cargo fleet on the Dnipro River. In Kyiv, the large supermarket chain Sil’po eagerly awaited their delivery.
Largely forgotten, these riverways had not been used to deliver produce to Kyiv for 14 years. If the pilot proved successful, riverways would succeed in linking southern Ukrainian agribusinesses, farmers, and their products to large trading networks in Kyiv and eventually Europe through Belarus.
Cruising the Dnipro River
On July 30, a barge loaded with 250 tons of watermelon was shipped from southern Ukraine. Our team was not the only one excited about this pilot. As the watermelons made their way to their destination, the Ukrainian prime minister took to Facebook to announce that a shipment of watermelons was traveling from the Kherson region of southern Ukraine to Kyiv for the first time in 14 years. Almost immediately, satirical versions of the enthusiastic post went viral, as Ukrainians took to Twitter to create good-humored parody accounts and memes. This new Internet sensation attracted a significant amount of attention from the media, and average Ukrainian citizens traced the ship’s movements online. These watermelons cruising the Dnipro river quickly became the most popular story of the summer.
The pilot was designed to test the economic efficiency of river transportation as compared to road transportation. Despite the excitement, the test did not prove the hypothesis. Compared to road transportation, river transportation increased delivery time from one to five days. The river terminal did not have the special loading equipment required to handle the fruit, which significantly increased the time of loading and unloading barges. Ultimately, the riverway method took eight days for the watermelons to arrive “from the field to the counter,” while it takes one day for the same route by road. Savings on costs, which were anticipated to be around 25 to 30 percent, were around eight percent. The project calculated that savings would be even less during off-peak months.
Yet, some unexpected positive outcomes did come from the pilot. Despite not being economically successful, the pilot reinforced market linkages between Nibulon, Sil’po, and farmers in the region. As a result, the transportation company Nibulon announced that it will almost completely redirect its cargo to water transport in the coming years and plans to link river terminals with agricultural producers within a radius of 80 to 100 kilometers using their modern truck fleet. It also proved that the region can supply quality products to retail networks throughout Ukraine.
Most importantly, the public attention the pilot put the subjects of transportation, river logistics, and infrastructure development on the national agenda. This initiative had a major impact on regulatory changes by opening political opportunities for the Ministry of Infrastructure to move forward with reform of internal waterways. In 2015, the Ministry of Infrastructure had drafted and presented a series of bills to Ukraine’s parliament intended to jump-start river transport. The innovations in the bills include removal of all limitations on river logistics, transparent competition rules, and a single, small river tax. The ARDS-supported pilot jump-started the stalled legislation and added new momentum to the reform. Public discussion of this proposed legislation occurred the summer following the pilot and Parliament is now preparing to register it as law.
In development we use pilot projects to test hypotheses, learn from the evidence, and inform future programming — best practices of the collaborating, learning, and adapting (CLA) methodology. However, as any good practitioner knows, there are just some variables outside of our control. What our team did not expect was that a pilot to test the economic efficiency of transporting watermelons via a network of river barges would become an Internet sensation and the subject of national attention. We believed this pilot had the potential to change Ukraine’s market system and in a way it did — though not how we expected.