Category Archives: Agriculture

TEF Forum 2016 Part II

Tony Elumelu, a Nigerian businessman is considered one of the most influential business people in Africa. He’s been an advocate for seed financing and angel investing for entrepreneurship across the continent, something that he’s dubbed “Africapitalism” and advances this through the Tony Elumelu Foundation entrepreneurship program that has seven pillars including mentorship, online resources, the annual forum, seed capital funding, and an alumni network.

Dr. Awele Elumelu and Tony ElumeluAt a Q&A session during the 2016 forum in Lagos, Elumelu spoke of his desire to expand the awareness of the program which currently has applicants skewed in Anglophone African countries (Nigeria had almost 1/3 of the applicants, followed by Kenya, Uganda, and Ghana). He said he’d been asked in France if this meant anglophone countries were more entrepreneurial but he said they were more aware of the program, and that he wanted to see more Francophone and North African participation in the program

He also spoke of his desire to grow the program even larger through partnerships with other organizations, one of which is the African Development Bank to match, and therefore double,  the number of fellows that the program is supporting.

Parminder Vir, the CEO of the Foundation also said that the 6-year-old organization would be  rebranding several aspects of the two-year fellowship program and that all initiatives will be realigned under the Tony Elumelu Foundation (TEF). So there will be the TEF  entrepreneurship capital management , TEF entrepreneurship hub, and TEF research & advocacy etc.

 TEF Forum at the Nigeria Law SchoolVir said they had also built a platform to link partners and the diaspora with the entrepreneurs and which can be vital to the program (e.g. Nigeria get $62 billion from the USA in remittance). She asked entrepreneurs to engage on the unique social network (not facebook or snapchat) as the platform is unique for investors thought leaders, partners, funders –  VCs, PEs, Angels who want to come to Africa and now would now have access to 65,000 entrepreneurs in the  54 countries who were  pipeline of bankable investments, and 2,000 have who had already received advanced entrepreneurship training.

Already the entrepreneurs who are diverse sectors, use the platform to share their stories, engage each other, network, market to each other, pose and get solutions to problems they face. This platform also forms valuable data for research and trends and they will be producing more research reports to market to the diaspora and potential partners.

The largest sector of those supported in the 2006 cohort are in agriculture (27%) followed by fashion/clothing and ICT, and about 1/3 are women. Vir said they were committed to supporting 20-40% of agri-entrepreneurs every year and this was echoed by other participants including former Nigerian president Olusegun Obasanjo.

The next class admission class to the Tony Elumelu entrepreneurship program will start in  January 2017.

Understanding Telephone Farming

Many people in Nairobi and other towns and in the diaspora are ‘telephone farmers’. These are people who own or have  bought, or inherited land, buildings, equipment on rural farm that they now support. They send money a few times  a month for salaries and for operations of  agricultural ventures that never seem to  have any significant payback.

The owners probably read the Saturday newspapers with envy as they see other farmers holding up rabbits, bananas, watermelons or other bounty from their farms which earn them thousands of shillings every week or month.

banana

The difference between them and the typical telephone farmer is that they are active investors as farmers, not passive which is what a faraway telephone farmer is.  That leads to the first point about telephone farming.

  • The goal of telephone farming is asset preservation, not income generation, and doing some economic activity on a distant farm protects it from invasion by squatters or grabbers.
  • The social aspect: Telephone farming sustains the local community; it keeps a line of communication open and allows for the community to have a stake in the preservation of the asset as they go about their business. The picture (above) depicts what should be a banana farm, but clearly the beans the workers are growing in the same field are doing much better. There might be pilferage, misuse of equipment, or other losses: but they should be within tolerable limits and not erode the underlying assets.
  • The costs of farming are much lower for telephone farmers compared to other businesses  investment in urban areas. E.g. labour costs are much lower: an amount of  Kshs 2,000 is a salary on many farms, but that could be an electricity bill in Nairobi.
  • A good rule of thumb for the telephone farmer is to be present at the farm during major operations like planting and harvesting.

Kenya – Dubai: Fresh Exports & Chamber Commerce Trade

There’s a delegation from the Dubai Chamber of Commerce & Industry in Nairobi this week and they were hosted by the Kenya National Chamber of Commerce and Industry (KNCCI). The Dubai Chamber announced that they will open a representative office in Nairobi, their fourth in Africa, after Addis, Accra and Maputo – to do market research, discover opportunities for partnership and value addition, support Dubai businesses in Kenya and give Kenyans information about business opportunities in Dubai.

dubai-flag

Kiprono Kittony said Kenya imports about $900 million from Dubai and exports about $300 million. He said that some challenges of business in Kenya include double taxation between the counties, infrastructure to the counties, corruption, but that he saw endless trade opportunities for their 14,000 members in 45 counties.

Naushad Merali said that when he first went to Dubai in 1982, it was smaller than Mombasa, but it had since transformed, thanks to Sheikh Mohammed’s leadership.  He said Kenya was one country with a stable currency and Dubai investors would not have to worry about moving money in and out the country – and that while manufacturing was difficult due to dumping from Asia, the advantage was if you were doing agro business, especially of things that are grown here. A Stanbic bank executive said they were the largest bank in Africa said they were ready to finance projects in infrastructure energy, renewable energy, tourism, electricity transmission etc. – and that while banks are able to do projects of $25 – $ 60 million, with larger than $100 – $200 million, ones there was need to syndicate across borders.

bananas-for-dubai

Hot button issue. Kittony also spoke of Kenyan flowers that go to Amsterdam and then get re-shipped to Dubai. He added that Kenya had developed a disease-free livestock belt that could export to Dubai and the Gulf states (GCC). Someone else said that there are only 5 Kenyan fresh products on Dubai supermarket shelves (including mango and avocado) out of a potential 70 others, and  lots of fresh stuff is sent to Europe where it is repacked and relabeled before being shipped to Dubai. While someone else said the lack warehouses and charter flights from Mombasa and Eldoret were the problem, another said that there were 14 Emirates flights a week, along with others from Kenya Airways and Etihad (and Qatar) – so flight were not the problem. Another said that Kenya had simply not marketed itself fully to Dubai in terms of what it could produce and export and get to Dubai via a 4 hours flight or a 12 day ship ride. Kiprono later lamented that flights flew into Eldoret, full of cargo, and flew out largely empty – while they could carry flowers, coffee, bamboo and other things.

AGRF 2016 $30 billion for African Agriculture

The ongoing  6th African Green Revolution Forum (AGRF) summit at Gigiri in Nairobi has seen a raft of commitments made by global and African organizations and leaders to increase production, income and employment for African farmers. The Gates Foundation and the Rockefeller Foundation announced an extension of their support to AGRA (organizers of the  event), who also celebrated their 10th anniversary this week.

Kanayo Nwanze, Agnes Kalibata, Akinwumi Adesina - three winners / laureates of the Africa Food Prize

Kanayo Nwanze, Agnes Kalibata, Akinwumi Adesina – three winners / laureates of the Africa Food Prize

Some of the announcements include:

  • African Development Bank $24 billion  to accelerate commercial financing and commercial lending to small farmers and agri-business, some of which will go towards partial risk and  partial credit scheme to improve the quality of agri-business investments to Africa
  • Gates Foundation $5 billion. 
  • $3 billion from the International Fund for Agricultural Development over 6 years (IFAD has a policy to spend at least half its $1.1 billion annual budget in Africa) .
  • Kenya Commercial Bank pledged $350 million (including $200M towards market infrastructure and $150M to livestock farmers) 
  • Kenya Government $200 million towards young farmers and entrepreneurs market access,  finance and insurance.  
  • Others were by $180M from the Rockefeller Foundation (including $130M to the Yieldwise initiative under AGRA to improve field storage), Yara fertilizer (to link small farmers to value chains), OCP Africa ($150M for local fertilizer distribution), World Food Program (will buy $120M from small farmers through a  Patient Procurement Platform), MasterCard Foundation ($30M to give small farmers market & credit info on phones in conjunction with KCB) and finally, USAID reported it had invested $6.6 billion through its ongoing Feed the Future initiative. 
$1 = 100

Secrets of a Farm Middle Man

 The middle-man* is widely derided, as one of many layers of between farmers and consumers, who squeeze the farmers prices lower, and increase the cost of foods to consumers. But what does a middle man-do, and why do they do it?

  • The money is insane. e.g. Middle-men get paid Kshs 50 per (90kg) sack of potatoes at the village, and others get Kshs per sack at the market. With every lorry having over 100 bags, a middle-man can make over Kshs 10,000/= per day just dealing at a market. But how much he /she has to share this cut, with others around the market system is another story.
  • Taxes: Cess/market fees are paid at the market of origin only. Along the highway, there are weigh-bridges,  but lorry with perishable items can’t afford to stay and queue while items go stale or rot. So they pay Kshs 2,000 per lorry to bypass the weigh-bridge, and they don’t have a cess receipt, its Kshs 1,000 to pass a police road block.
  • The farther the market is from the farm source, the bigger the profit for the transporter or middle man e.g transport all the way to Mombasa, or to Tanzania where a lot of Kenya produce ends up, and vice versa.
  • It does not tolerate strangers. A farmer can’t just drive up with his lorry, and expect buyers to embrace him/her. It can even be murderous.
  • It’s a relationship business. They have to network &  know where to find and sell produce and deliver on time.
  • Middle-men value and deliver on quality. If several lorries are waiting to clear at at a market, they can choose the ones with produce from a certain area that is desirable compared to that from others. Also lorries with produce from single farms are desirable over those collected from many different farmers or areas.
Middle men travel far to search for farm products.

Middle men travel far to search for farm products.

  • We are the reason they exist. Hotels and restaurants need food like chips every day of the year, regardless of where the potatoes come from. The middle-man economy ensures that this happens.
  • The business is hard work. The trades and operations are done very early in the morning, and end at about sunrise. This may tie in with the Equitel loans that start at 1 a.m. peak and are disburse by 5 a.m. before Equity Bank branches even open. When you visit a market in the day time, you see retail trade & prices, while the wholesale business has already been completed.
  • There is honor in this: Middle-men will  under-cut each over deals, but will not cross each other on payments, which they do  via mobile money or bank deposits.
  • When farmers talk to middle-men about the money they make, some immediately want to abandon farming, while forgetting that they have one resource that the middle-man doesn’t – their land.

Notes

  • * There are lots of women in the business – so middle man can also mean middle woman
  • $1 = Kshs 100