COTTON OUT-GROWER SCHEME INTRODUCTION Nexus is a Zambian owned company with a vision to enhance value addition in the cotton sector by getting involved in spinning. Our values are to put our farmers / customers at the center of what we do, to grow through creativity, invention and innovation and to integrate honesty, integrity and high business ethics into all aspects of our business operations.

COTTON OUT-GROWER SCHEME OVERVIEW This business model for Nexus is essentially based on the out-grower scheme, where the Company pre-finances the growing of cotton through Agents. This entails channeling of inputs from Nexus, through Agents, to smallholder farmers who are contracted to the said Agents . In return, Nexus purchases all of the crop output after harvest at a preset price less the value of inputs supplied. The inputs are provided on loan at planting time and the loan is paid off when the crop is sold. Agents look after a group comprising, on average, 25-50 farmers contracted through the Company’s extension network. The main role of Agents is the distribution of inputs to their farmers and supervising them to ensure that they adhere to agronomical practices required for good crop production. The Agents purchase crop from their farmers and arrange transport (own or hired) to deliver crop to the designated point (ginnery or bulking point). Once the crop has been received at the gin, this is processed into lint and fuzzy seed.

COTTON OUT-GROWER SCHEME CORE ACTIVITIES

COTTON OUT-GROWER SCHEME COTTON VALUE CHAIN

COTTON OUT-GROWER SCHEME Nexus has financed about 30,000 farmers in its initial season, and will work to increase numbers to 120,000 by the year 2019. In its first season, Nexus will toll gin the cotton and is expected to purchase 4,000-10,000 tons of seed cotton. It has trained Agents in different topics including land preparation, planting, weeding, integrated pest management (IPM), fertilizer application and best practices in harvest and post-harvest management. In turn, the Agents are passing on this knowledge to their farmers in order to support the cotton value chain, Nexus will work to provide farmers with improved seed to boost their productivity In addition to the improved seeds, Nexus will also provide farmers with an input package that includes foliar feed, pesticides, insecticides and herbicides Storing and transporting cotton requires critical skills. Therefore, Nexus will make sure that necessary support is provided to the farmers so as to enhance their know-how on the transportation and storing of the cotton from the field to the ginning facility

COTTON OUT-GROWER SCHEME ORGANIZATION Nexus has employed its own field staff who will mobilize and manage the out-grower smallholder farmers Nexus have engaged local people (Agents) who will work on the basis of a commission and will be a link to the out-growers Nexus is providing inputs on credit, extension advise, packaging materials and offer support on transport of cotton. It will purchase the crop from farmers and then process, package and market the products; lint and fuzzy seed Nexus have ensured that conditions that apply to the provision of inputs, range of inputs made available, cost and loan repayment modalities are clearly stipulated. There is great potential to make reasonable income on sale of inputs to smallholder farmers when loan recovery rates are good

COTTON OUT-GROWER SCHEME VALUE ADDITION In order to maximize on value addition, Nexus will look to enhance the cotton value chain by either; a) getting involved in a spinning mill (i.e. investing in a spinning mill as an integral part of the cotton out-grower scheme) OR b) partnering with an already existing spinning company which will allow other out-grower companies to sell their lint to the said spinning company. The benefits for this option are immense.