FARMWORKS ECONOMIC AND SOCIAL IMPACTS SURVEY 2023 – EXECUTIVE SUMMARY (Abbreviated)
The 2023 results will update the previous Economic and Social Impacts of FarmWorks Support for Food Related Businesses 2020.
Recognizing the benefits of investments in local businesses the Government of Nova Scotia established a program in 1998 to enable individuals to invest in Community Economic Development Investment Funds (CEDIFs).
FarmWorks Investment Co-operative Limited was established in May 2011 by community leaders concerned about Nova Scotian agriculture and food: economic issues, security of supply in a changing world, cost, health, social and cultural issues and the environment.
FarmWorks’ mission is to promote, and provide, strategic and responsible community investment in food production and distribution in order to increase access to a sustainable local food supply for all Nova Scotians. Finding financial and other support to establish and operate food-related businesses can be difficult, especially for younger entrepreneurs or those who are not eligible for financing through existing lending agencies.
FarmWorks established a CEDIF that started selling shares in 2012. By the middle of 2023, FarmWorks had raised $5,209,300 and loaned over $9 M to qualifying clients in various sectors of the Nova Scotian food supply chain including farmers, processers, distributors, retailers and restauranteurs.
Quantifying the economic and social impacts of FarmWorks’ clients helps gauge the effect of FarmWorks CEDIF in helping to grow rural and urban food-related businesses.
The 2023 survey was completed by 62 of 91 (68%) clients to gauge the economic and social impacts of their businesses. Of the 62, five had finished repaying their loans within the last year and four had opened their businesses within six months. The survey does not include 27 businesses that repaid their loans more than a year ago and continue to operate successfully, three businesses that are in transition, four consumer debt repayments, and 21 that have ceased to operate including eight that have been written off.
Before receiving funding 30% of applicants were not in operation and 52% were seeking loans to improve their business outcomes.
The importance of FarmWorks loans is clear as 67% indicated that their business would not have succeeded and 26% considered success would have been only somewhat likely without the loan. Overall, 89% said the loan enabled their business to expand production.
Seventy three percent of businesses used initial funding from FarmWorks to start or expand and 69% were able to borrow additional funds after receiving a FarmWorks loan.
Sixty-six percent of loans were multiple purpose including one of more of equipment, leasehold, working capital, construction, refinancing, land purchase, and professional services. Equipment purchase was the most frequent reason for borrowing with 18% indicating equipment only, 26% indicating equipment and one other use of funds, 34% indicating equipment and two or more additional uses of funds, and 23% used funds for working capital.
The 62 respondents are paying 231 full time and 192 part time employees approximately $8,000,000 and extrapolation to 91 businesses would indicate up to 300 full time and 250 part time positions. Hourly full time wages ranged from $15.00 to $32.00 with an average of wage of $19.00 and 38 of 42 clients paying above the minimum wage. Hourly part time part time wages ranged from $14.50 to $20.00 with an average of $15.95 and 41 of 47 paying above minimum wage.
Every 100 direct jobs in agriculture is estimated to generate another 228 jobs, and in food service 161 jobs, as reported by the USA Economic Policy Institute[1].
FarmWorks clients generated approximately $26,500,000 in annual gross business revenues with annual business expenditures of approximately $20,000,000 before owners draws of approximately $2,000,000.
It could be estimated that the 91 businesses are generating approximately $35,000,000 in annual gross business revenues with annual business expenditures of about $26,000,000 (Note 1). Multiplier effects ranging from 1.8 to 2.6 for food-related enterprises indicate that FarmWorks’ clients’ annual expense monetary impact in Nova Scotia may range from $45,000,000 to $70,000,000[2].
Clients were asked about FarmWorks assistance with mentoring, networking, and promotion and 69% indicated that business outcomes were somewhat or much better.
In response to the question whether the client believes they are assisting with increasing food security within Nova Scotia 49 of 54 considered that they were. “I hope so! We love working with our local suppliers as their product is far superior to anything else we can get.”
Fifty five clients responded positively – many at length – to the question about ways in which they are contributing to their local community. “Gathering place for community, encouraging consumption of local products, encouraging healthy lifestyle by location on an active trail”, “Donations to foodbanks, fundraising events, providing a local meeting/gathering place”, “Volunteer 100 of hours per year to feed homeless people and people suffering from food insecurity”, “Making local, healthy food options available 52 weeks a year, 6 days a week with transparency in labeling for guests as well as providing a good employment”.
Note 1. Since the survey asked businesses to estimate their total Gross Business Revenue for 2023 in a variety of range options, it is necessary to use a calculation to estimate the total Gross Revenue created by the responding businesses. Estimates were made on an amount of $40,000/year for survey respondents selecting under $50,000 and $1,000,000 for those over $900,000 and the average of the remaining category options. Revenue for 62 businesses was approximately $26,500,000 and extrapolated to 91 businesses would be approximately $35,000,000. Expenses for 62 businesses were approximately $20,000,000 and would be approximately $26,000,000 for 91 businesses.
IMPACT - Karaphillis Impact Study
Tax credits of less than $700,000 by the NS government in 2019 netted $2 million in investment by Nova Scotians into CEDIFs. These NS CEDIFs invested in 116 small businesses whose annual economic impacts in 2019 were: • $118 million annually in GDP value-add • 1200 jobs (FTEs) • $52 million in annual wages and salaries • $25 million in annual taxes
OVERVIEW - Karaphillis Impact Study
A Community Economic Development Investment Fund (CEDIF) is a pool of capital raised through the sale of shares, which is then reinvested into local businesses. Nova Scotia residents who invest in CEDIFs receive a 35% Provincial Non-Refundable Income Tax Credit if they leave their investment in for 5 years. If they roll it over for another 5 years, they receive an additional 20% tax credit and then another 10% if they keep their investment in for the maximum 15 years – for a total of 65% return on their investment. The minimum investment is $100 and the maximum investment is $15,000 per year, per shareholder. CEDIFs are RRSP eligible, so people can redirect their RRSPs into a CEDIF and receive the benefits of both programs.
“Nova Scotians make equity investments regularly though the tax-advantaged RRSP program: 126,280 Nova Scotians invested $924.5 Million in RRSPs in 2018 and the vast majority of these funds were invested outside the province.”
Indeed, government reports that less than 2% of RRSP investments are reinvested in Nova Scotia businesses, with the rest leaking out of the economy. And this is just in RRSPs alone. CEDIFs keep 100% of citizen’s investments at home, circulating in local economies and creating jobs, particularly in rural communities.
Community financing for sustainable food systems: The case of FarmWorks Investment Co-operative
Phoebe Stephens a, Irena Knezevic b, Linda Best c a University of Waterloo, b Carleton University, c FarmWorksExcerpts:
“We present a case study of a Nova Scotia community investment fund, FarmWorks, to explore how existing community-based initiatives work on the margins of capitalist economy and seek to challenge agri-food financialization and industrialization. We argue that FarmWorks puts the social economy concept into action, by attracting investments that are not aimed at maximizing profits, but rather at social and environmental impact alongside economic sustainability.”
“Community investment funds are a form of impact investing where investors have a more direct link to the enterprises they support. They “are locally sourced and controlled pools of capital that are capitalized by individual investors within a specific geography or community” and “have demonstrated success in helping provincial governments achieve policy objectives in job creation, small and medium sized business development, and affordable housing development”
“FarmWorks functions as a Community Economic Investment Fund (CEDIF), a policy framework set up by the Government of Nova Scotia. The CEDIF program was established in 1999 in an effort to stimulate local economic development (Kennedy et al., 2017). The program was designed to keep taxpayer dollars in the province because a staggering 98 percent of Registered Retirement Savings Plans (RRSPs) was leaving Nova Scotia for larger commercial centres (CEDIF, n.d.). The CEDIF model is a result of extensive public consultations in the mid-nineties that highlighted the importance of developing funding sources within the community, and emphasized the need to uphold local autonomy regarding investment decisions (CEDIF, n.d.).”
“CEDIFs provide tax advantages to individuals who invest in local projects in order to “provide new employment opportunities and rejuvenate existing economic sectors in the province” (Kennedy et al., 2017). CEDIFs cannot be charitable, non-taxable or non-profit (CEDIF, n.d.), positioning them as a hybrid between funds that are focused solely on maximizing economic return and pure philanthropy. The success of this hybrid model is attracting attention from other jurisdictions seeking to revitalize local economies in underserved communities. PEI replicated the CEDIF model under the Community Economic Development Business (CEBD) program (Canadian Cooperative Association, 2013, p. 5). In 2003, after reviewing Nova Scotia’s experience, Manitoba created the Community Economic Development Tax Credit Program (CEDTC) (Canadian Cooperative Association, 2013, p. 10). As of 2012, the Alberta Community and Co-operative Association was working on replicating elements of the CEDIF program (Canadian Cooperative Association, 2013, p. 1). Further westward, in 2016 the Union of British Columbian municipalities endorsed a resolution for the Ministry of Finance for British Columbia to initiate a CEDIF program (Community Impact Investment Coalition, 2017, p. 4). These developments indicate that the larger model under which FarmWorks functions, is increasingly viewed as an essential component of successful rural economic revitalization (Canadian CED Network, n.d.a).”
“The CEDIF model relies on significant incentives to investors to invest their money into local economy. Investors purchase shares that are non-refundable for five years. Those shares are eligible for a 35 percent Nova Scotia non-refundable Equity Tax Credit that can be carried forward 7 years and backward 3 years, and are eligible for further Equity Tax Credits of 20 percent and 10 percent are offered at the 5 and 10-year investment anniversaries, respectively, provided the CEDIF meets Department of Finance conditions. CEDIF shares are eligible registered retirement savings plan (RRSP) investments (Kennedy et al., 2017).”
“FarmWorks loans have allowed its clients to increase their revenue and hire more employees. Every investee that we interviewed stated that FarmWorks filled a financing gap that they could not access elsewhere. Job creation and enhanced profitability are helping to revive the local food sector, increasing prosperity within small rural communities. FarmWorks has significantly contributed to employment in Nova Scotia’s food sector, with 70 percent of jobs generated by FarmWorks clients being attributed to their FarmWorks loans (Kennedy et al., 2017), which would amount to more than 1 percent of total employment in the agri-food sector in the province7. FarmWorks clients are able to source between 65 percent and 70 percent of their goods and services from their home province, allowing them to support other local businesses (Kennedy et al., 2017). Moreover, there is evidence that these businesses are helping to support a budding local food culture, positioning Nova Scotia as a culinary tourism destination. As one investee, who owns a booming business in Dartmouth, put it, “I feel very strongly about putting my money in other people’s hand who are here in Nova Scotia. I also want to create a unique place in Nova Scotia for people to visit].” Because of the economic multiplier effect of the food sector, and based on the past data, it is estimated that the annual gross revenue of FarmWorks’ clients, amounting to $8 million could generate between $11.2 to $20.8 million for the provincial economy (Kennedy et al., 2017). Far from suggesting that the organization deserves sole credit for this, both the FarmWorks client survey and our interviews suggest that this revenue would not be possible without the support from this investment fund.”
“As a CEDIF, FarmWorks takes a holistic approach to its lending practices. In addition to loans, FarmWorks provides assistance in the form of advice and mentoring, promotion, encouragement, connection-building, and awareness-raising (Best, 2018). This mix of support is intended to increase businesses’ resilience to external shocks. Another way in which FarmWorks strengthens community resilience is by supporting a diversity of businesses. Diversity is a cornerstone of resilient ecosystems and is increasingly being recognized as a vital component of resilient economies (Bharma, Samir, & Burnard, 2011, p. 5387). Through the interviews it became clear that, board members incorporate a systems lens in their investments decision-making. They are cognizant of the importance of building markets for local farmers and are thinking of ways to grow processing, retailing and restaurants in order to strengthen the prospects for Nova Scotian farmers. While, to a degree, the board is constrained by which types of businesses approach them for loans, they can still consider the benefits of lending beyond the impact to one particular business and strategically invest in ones that may support the growth and sustainability of the food system as a whole.”
“FarmWorks demonstrates that not relying solely on capitalist, positivist measures of success, and investing in diverse economies, can make communities better places to live in both tangible and intangible ways, as interviews with stakeholders have revealed. Its adherence to principles of cooperation, mutuality, participation and community empowerment is reflective of FarmWorks’ alignment with common understandings of the social economy (Jennings, 2012, p. 4). Moreover, its dedication to building social capital through relationship lending is another strong indicator that FarmWorks seeks to employ the tools as well as build the capacity of social economy.”
