Embu, Kenya – On a sunny Saturday afternoon last month, I stopped by Joyce Murugi’s five-acre farm in Embu, 80 miles northeast of Nairobi, on the south-eastern side of Mount Kenya. Neat rows of mango trees, heavy with a mix of healthy yellow and red fruit, greeted me, along with Murugi herself.
“My late husband and I planted these trees,” Murugi, a widowed mother of two said. “We hoped that these trees would help support our family.”
The visit was one of more than 200 I’ve made to small farms this year alone as I travel to meet many of the 3,000 smallholder farmers who have signed up with Selina Wamucii. With John Oroko, I co-founded the mobile phone-driven sourcing platform for fresh produce. Selina Wamucii recently received a $100,000 grant from Expo Live, part of Expo 2020 Dubai.
My travels have both challenged and reinforced my beliefs about the state of smallholder farming in Kenya. I’ve seen first-hand the progress that has been made in smallholder farmers’ productivity and the positive impact this increase in yield has on the farmers’ lives, families, and communities.
I’ve also met many farmers like Murugi, whose priority now is not access to inputs, farming tips or some new, shiny technology. Instead, their number-one worry is “I have this bumper harvest. Where will I sell it?”
Go to market
A number of impact investors are paying attention to the immense social and financial return opportunity in helping these farmers manage increased productivity and the need for reliable market access.
How can small farmers boost their productivity? How can they bring their produce to market with minimal wastage? Some 80% of farms in the region are smallholder plots and they contribute up to 90% of food production in some areas. Current research shows that up to 50% of smallholder produce gets wasted at farms, with some studies recording wastage as high as 80% for fresh fruits and vegetables. This is true even after interventions in the last decade have led to an increase in smallholder productivity.
Take Murugi’s mango trees. Part of the reason her fruit is clean and healthy is because of a simple solution to the problem of fruit flies that has nagged mango growers for generations. Until recently, she didn’t fight fruit flies effectively. Now, hanging from a branch every few trees along the row, you find a fruit fly trap. The result? An over 600% increase in the number of quality fruits she is able to harvest from each tree.
But as she and other small farmers harvest more fruit, they face challenges finding a market for the increased production while keeping prices at a profitable level. Murugi and all the farmers I meet say market access and better prices are their top concerns.
Market access is the priority area now for impact investors keen to tackle food loss and increase income for poor smallholder farmers while earning a return on their investment. It’s no wonder that impact investors like Omidyar Network, AHL Venture Partners, Ceniarth and Village Capital are investing in food value-chain startups across Africa. These ventures include Agrocenta, Twiga Foods and our company, Selina Wamucii.
Many of the farmers I meet are concerned about the difficulties of integrating productively into food value chains via small and medium processors. Impact investments that strengthen producer-processor relationships stand the best chance of achieving sustainable success.
That’s because the success of these processors is directly linked to farmers’ ability to produce the required volumes of high-quality fruits, vegetables and other products. That means the interests of processors and those of smallholder farmers are aligned: When a local dairy processor provides its farmers with quality feeds and artificial insemination services, often on credit, this leads to an increase in the farmers’ milk production, which means the processor has more milk to sell. Typically, the costs of these critical inputs and services are deducted from farmer earnings after delivery of the product, in this case the milk, to the processor.
The same applies in the case of a mango grower and a fruit processor. Supplying the farmers with quality seedlings and training on good agricultural practices means more and higher quality fruit for the processor.
Most of the hurdles smallholder farmers face, such as access to basic production factors including quality inputs, new technologies, credit, and extension services, can be reduced if not entirely eliminated in an ecosystem where there are strong farmer-processor links.
Arabella Advisors founder Eric Kessler was right when he said the biggest bottleneck in a good food value chain is not entrepreneurs but access to capital. Processor and other businesses that rely on small farmer output are capital intensive. Access to capital for these businesses is critical, yet only 10% of private capital investment is going to entrepreneurs in emerging markets.
It should come as no surprise that these processors — who have such limited access to working capital — struggle with capacity issues.
Such capacity issues came up almost immediately when we started Selina Wamucii. Since we pay all our farmers promptly, working capital is a limiting factor. It can take retailers and other customers up to 30 days to pay us for fresh produce deliveries. Because of this, we are only able to accept slightly over 2% of total orders. If we could increase our order acceptance rate, say to 30%, we could work with over 90,000 farmers while turning a profit, earning a return for investors and having a positive impact on more small farmers.
And we’re just one company. If you consider the entire regional economy, with its millions of small farmers and thousands of businesses in the food value chain, huge social and financial opportunities emerge for impact investors.
Meanwhile, Murugi is having a good year, thanks to those fruit fly traps and Selina Wamucii’s guarantee to buy what she grows. She earned 168,000 shillings ($1,680), the highest ever from the sale of her mangoes. Some of these earnings will go towards paying school fees for her two teenage children in boarding schools. “The future looks promising,” Murugi told me, as she picked a juicy mango and handed it to me.
But, what happens to millions of other farmers like Murugi whose hard work gets wasted? Up to 80% of the smallholder-grown produce is currently not reaching the market. This is where impact investors come in.
The challenge is to get impact investors to invest to build the links between farmers and processors in ways that help farmers boost output and give them confidence that they can sell everything they produce. That’s a necessity if impact investors want to help create an ecosystem where the farmers, the processors — and the investors — all thrive.
Gaita Kariuki is the co-founder of Selina Wamucii, a Kenya-based, mobile phone-driven sourcing platform for fresh produce from smallholder farmers. A chemical engineer, Gaita lives in the village of Leshau, Kenya.