Three years ago, I found myself reporting from a Kenyan avocado farm for the Irish Farmers Journal. The fruit of choice on the brunch table of Dublin’s millenials was flying off the shelves all over the developed world. Yet the farmers growing it were struggling: with no banks willing to take the risk of investing in African agriculture, they were dependent on cash-strapped traders roaming the countryside in their lorries on the hunt for the lowest-priced produce available.
Once the lorries hit the cities, the merchants made their cash, filled the tanks and went back out to the farmers waiting for payment and more uncertain deals. There was one exception in this race to the bottom: those buying and selling through TruTrade, a social enterprise allowing buyers and sellers to seal deals through their phones. TruTrade advanced payment to the farmers, effectively extending working capital credit to the merchants the banks did not want to lend to.
There was a trick: TruTrade would only lend when the deal guaranteed a minimum price for the farmers. It is a social enterprise operating across Kenya and Uganda and controlled by the Irish charity Self Help Africa.
€26 million fund in Zambia
A few days ago, I heard again from Self Help Africa. As previously, it was about boosting agri-food supply chains in eastern and southern Africa, but this time the charity is managing direct investment into private enterprises on a significant scale. Along with UK-based consultants Imani Enterprise, it has just secured a contract to manage €26 million in EU funds to invest in agribusinesses in Zambia.
This is in addition to a similar fund already in operation in Kenya called AgriFI, with €18 million under distribution. The projects operate as challenge funds, allocating grants competitively to food processing and trading companies that can raise equivalent amounts themselves. Selection criteria for the investments include the number of smallholder farmers who will enjoy greater market access as a result.
AgriFI awarded €4 million to eight businesses in its first call and has just closed a second round, selecting 17 companies for €7 million investments. In its largest awards to date, it has made a €1 million grant to Kenyan avocado oil manufacturer Olivado EPZ to support a €6.5 million expansion into mango trading and processing. The investment includes training for 10,000 farmers, and over 6,000 of them are being offered mango supply contracts.
Another company, SunCulture, has received €550,000 representing just under half of its investment into distribution and service centres for its solar irrigation products. More recipients include a farm machinery leasing firm, a biofertiliser manufacturer, two dairy co-ops and a Lake Victoria fish farm. The two projects combined aim to create 20,000 direct jobs in 100 businesses and benefit 250,000 farmers.
“Agriculture is seen as a place where it is really tough to make money.”Will Galvin, Self Help Africa
Although agriculture occupies up to 75 per cent of the labour force in sub-Saharan African countries, just “15 per cent of lenders in Africa offer services to agriculture,” Self Help Africa’s Executive Vice President Will Galvin told The Currency. “Agriculture is seen as a place where it is really tough to make money. You have all these smallholder farmers who are growing food which is tricky to feed into a food industry able to process it locally.”
There has been running Irish involvement in the EU’s policy to tackle these problems in African agriculture, not only as an aid project but also as an issue connected with two other major challenges for Brussels: climate change and migration. In 2017, then Commissioner for Agriculture Phil Hogan formed a “task force on rural Africa”.
The expert group chaired by Irish agricultural economist and former Concern CEO Tom Arnold handed in its report last year. Two of its six recommendations centred on “improving access to private finance and to EU cooperation instruments for small- and medium-size agriculture and food business” and “scaling up sustainable value chain development”.
In Kenya, the European Investment Bank agreed last year to lend €50 million to local financial institution Equity Bank for on-lending to agriculture and food businesses. Companies selected for AgriFI grants can borrow additional finance from this fund.
Galvin said supported businesses were matching funds with a blend of equity and debt. “Some entrepreneurs have access to capital themselves – just not enough,” said Galvin. “You’re trying to pump-prime a market,” he added, comparing the EU challenge funds to the Agricultural Credit Corporation established by the Irish Free State in 1927. The public financial institution ran until ACC Bank was sold to Rabobank in 2002.
Although there are still needs for individual farmer support, Galvin said his organisation was moving on from a charity or hand-out culture. “This is the changing face of Ireland’s development dollar,” he said.
“There is a critical need to build an employment base,” Galvin added. “26 million African men and women are going to enter the labour force this year. It will be 30 million by 2030.”