Not By Technology and Money Alone
Written by Gieljan Beijen
In March 2017, 2SCALE1 consortium partner ICRA organised a review and capitalization workshop. ICRA agribusiness trainers, who have been training and coaching supply chain actors in the 2SCALE programme for several years, came together from Benin, Ghana, Mali and Nigeria. The objective was to collectively reflect and draw lessons from their work. The gathering included a write-shop to translate these lessons into stories. This resulted in a booklet of 15 stories illustrating the importance of strengthening functional capacities, i.e. relational and organisational “soft skills” that make local actors function better in their value chain as agribusiness partners. Each blog in this 6-weeks series showcases two or three stories from this booklet and highlights how the stories address a specific theme in agribusiness development. This week features how capacity strengthening impacts business relationships within agribusiness clusters (ABCs) with two examples from Nigeria.
Better business relationships
“Before our interventions, farmers were only concerned about themselves and their individual issues. The traders were also in it for themselves, as were the transporters and all others in the value chain. But good business needs to avoid a chaotic situation in which everybody grabs the other by the neck”, says ICRA’s agribusiness trainer Gbenga. Collaboration in agribusiness clusters has proved to be key in this, as it improves what is most essential in business relationships: trust. With trust as fundament, ABCs enable better (contractual) arrangements between farmers, transporters, input-providers and banks.
Better tomato produce, better grouping, more money!
“If you take a group of farmers from any agribusiness value chain and ask them what their problems are, one of the first two responses will be: money. The actors involved in the Iya Ibeji tomato cluster in Nigeria are no different”, says agribusiness trainer Sola Fagorusi. Iya Ibeji means “mother of twins”, named after the history of the community where the cluster first took off. At the beginning of their engagement, the cluster actors reckoned that more money was what they needed to make even more money. They brought up a Yoruba proverb to explain this: owo n’fin wa owo, meaning: “we use money to chase money”. In this, the cluster actors were not totally wrong. But they were putting the cart before the horse.
The situation started to change after ICRA’s agribusiness trainers carried out trainings on good agricultural practices (GAP), such as the use of new and improved tomato seeds. They also coached them on credit-input management, post-harvest handling and marketing and business plan development. The ABC actors actively participated in these processes, took ownership over them, and over time realised that what they most needed was not in fact money.
Whereas the actors were first hitherto organised separately in farmers’ unions and a few other independent unions of processors and transporters, the coaching sessions brought the different actors along the tomato value chain – Producer Organisation’s, input dealers, agro-processors and transporters – together into one cluster. After this development, the tomato farmers found out that they suddenly had access to loans, a feat they could only dream about while they operated as a small and scattered group. The new credit, in combination with GAP (such as the staking of tomato plants), led to a 30-fold increase in average yield – from 0.3 to 10 tonnes per hectare. Using the information acquired during coaching sessions, the ABC actors have become conscious of how better vegetable handling processes reduce losses and increase profits.
From being a small and weak group of independent people involved in tomato production and value chain-related activities, the Iya Ibejiactors now discuss issues with business in mind. They see the numbers, they see the produce and they make profitable decisions while addressing challenges in the process. They now fully realise that it is much more than money that leads to success.
Big firm, small farmers and transporters join together in the journey towards a fair deal
Psaltry Ltd is a company processing locally sourced cassava into starch for sale to Nigerian Breweries; the largest brewing company in Nigeria that markets well-known brands of beers, malt drinks, and soft drinks. Psaltry produces cassava on its own farmland, but this is far below the 100,000 metric tonnes needed on yearly basis. An umbrella body of 33 farmers’ groups with about 1,300 members therefore takes care of the rest of the required raw material.
Despite Psaltry’s ability to process tons of cassava on a daily basis, the low productivity of these cassava farmers initially formed a serious setback. Not only improvements regarding good agricultural practices were needed, farmers also struggled with very high transportation costs. The relationship between smallholders and transporters was also rather uncooperative. Farmers, for example, complained that transporters were not careful enough when loading their produce and ended up loading less than the full capacity of their trucks. As transport prices were set per truck, this formed a serious issue. Secondly, problems existed due to the delay in payment by Psaltry to farmers and transporters. In addition, there was dissatisfaction with Psaltry’s weighing bridge. The counter was only readable in a room with a sign “No entrance for non- staff”, whereas transporters wanted to read the weight themselves to be sure not to be cheated.
As a response to these kind of issues along the value chain, Gbenga – agribusiness trainer of ICRA – started to draft a capacity strengthening plan. Value chain actors were brought together in agribusiness clusters (ABCs) and a series of coaching sessions on different themes stimulated farmers and transporters to engage with one another, as well as with Psaltry and other business partners. Through the work of Gbenga’s team of ABC coaches, the farmers from the different clusters soon formed an apex farmer organisation. This umbrella organisation enabled farmers to speak with one voice to its partners. Their unity led them to review transport prices with the transport union, which was key because transport accounted for more than 50% of their production cost. They were able to negotiate transport costs down by 20% and instead of paying per truck, the farmers now pay the transporters per ton of cassava loaded. As a result, the transporters now more carefully load the cassava roots into their trucks. Moreover, the transporters also organised themselves better in transport committees at cluster level. This led for example to Psaltry reviewing its ‘No entrance for non-staff’ policy so that transporters are now allowed to read the digital weighing counter. Thanks to established linkages with local banks and through clear contractual arrangements (at annually set prices) between Psaltry and the farmers’ organizations, Psaltry can now also provide more financial incentives to the farmers, such as agro-inputs on credit.
Although price negotiation between Psaltry and the apex farmer organisation remains a continuous challenge, the soft skill coaching efforts have bared fruit. 2SCALE facilitator Francis Alelumhe, who has been supporting the negotiations in the cassava partnership, explains. “In March 2017, I got a call from Nasiru Oladokun – chairman of the apex farmers’ organisation – that he was planning to meet Psaltry to negotiate a new price for their cassava produce. I told him to give me about an hour to be ready to join them. To my dismay, he said the call was just to inform me and not necessarily to invite me. Two hours later, my UB40’s Many River to Cross ring tone came alive again. Nasiru sounded upbeat. ‘We just agreed to 18,000 naira (€ 50) per tonne’, he told me. Before I could respond to congratulate him, he added again, … ‘and this time excluding transportation costs to Psaltry’. This came as another shock as I could not have pulled a better deal. As our phone call ended, it took me some time to understand the new reality. In 2015, shortly after the partnership started, Nasiru requested that I lead the negotiations with Psaltry. Now in 2017, they no longer needed me as their lead negotiator. Our months of hard work were yielding results before my very eyes”.