Nuts about tiger nuts
Moumine lives in southern Mali, in the Sikasso region, the only region where tiger nut is cultivated. Moumine is a tiger nut trader, with clients in Spain, who process tiger nuts into a souchet drink.
His clients demand big tiger nuts delivered free of sand and in large quantities as the production in Spain diminishes. In order to deliver the required quantity and quality, Moumine contacts Jekafo, a cooperative union group of 24 tiger nut producers. The cooperatives have been set up with the support of Grefa, a service provider supported by the Netherlands-fund1000s+ project, the precursor to 2SCALE.
Moumine made the tiger nut producers believe he would pay a better price for better quality, so they would put much more time into sorting out and calibrating their produce. To boost production they dedicate more areas to tiger nut cultivation and use mineral fertilizer, an expensive input which they have to purchase on credit.
Moumine and Jekafo’s managers have negotiated a substantial loan with the local bank director. This allows the Union to provide fertilizers to its members, through a contract negotiated with an input provider. Jekafo is grateful and agrees with its members that they will pay back in kind, i.e. in tiger nuts, for the credit, including interest, at the time of harvesting. These tiger nuts will be collected by Moumine who, accordingly, will pay the bank in cash. Thus the Union kills two birds with one stone: its contracts – one with the bank, the other with Moumine – will be met. The Union is extremely satisfied with this deal.
And so is Moumine, as he will be able to sell the quantities he had foreseen and he has dollars in his eyes. But Moumine is too self-interested. And hoping that the tiger nut producers have no knowledge of the prices and demand on the international market, he offers a lower price than the one stipulated in the contract, so he can reap a higher profit. He argues that he cannot pay more, because his Spanish clients will not buy the produce if the price is too high. The negotiations between him and the Union stagnate. The Union is not willing to sell below the contract price, as they would then encounter major difficulties in paying back the bank. However, the Union is short of arguments to make Moumine change his mind and to raise the price.
By dint of discussing with Grefa and other service providers and desperately looking for solutions to sell their stock, the Union gets a very important tip: the name and email address of Xavier Santos, one of Moumine’s major clients in Spain.
The Union contacts Xavier, to ascertain his interest in buying their stock directly. Xavier, who had been informed by Moumine that the amount of Malian tiger nut would be limited, now knows that this is not true. And he wants this to reach Moumine’s ear. So, in his email reply, he asks the Union to contact Moumine, as he normally trades with him … the email intentionally cc’s Moumine.
Moumine gets worried that he might lose the market with Xavier and others. He is afraid the Union might sell directly to Xavier or any other Spanish Tiger nut trader, and he immediately proposes a higher price to buy the tiger nuts. The Union accepts this price, and the deal is made allowing all contracts to be granted. This is clearly a win-win outcome for all stakeholders involved: Moumine, the bank, the fertilizer dealer, the tiger nut importers and producers and their Union.
The Union is able to repay the credit and is able to obtain a new loan as the bank is confident it will be repaid. The same can be said for the fertilizer dealers who have been paid and who plan to pre-finance fertilizer purchase for next season. Also the producers are better off. Thanks to the Union they received a higher price for their produce and obtained fertilizer on credit and on time. They decide to produce more and sell more to the Union next season.
Moumine did not lose his client. Business and trade is his life. But he also understood the power of information and that he has to deal fairly with the other stakeholders in the tiger nut value chain; he is no longer the only one to decide on prices! Now that the Union and the producers are better informed on international markets and prices, they have powerful arguments to negotiate prices.
Written by Marie Loosvelt and Toon Defoer