From Silicon Valley to Swaziland, Rick & Wendy Walleigh [i love reading books .txt] 📗

farmer can pay his children’s school fees, give them decent clothing, and provide for health care. In sum, it can make a huge difference.

Moreover, as a farmer begins to generate a surplus of crops beyond the minimum for subsistence, he can begin thinking about investing that surplus in better tools, equipment, or additional crops that can further improve his economic situation. And the best part of this whole story is that once the markets and the fully functioning value chain are established, they are self-sustaining. They operate on standard free-market principles and can maintain themselves without TechnoServe’s involvement. They continue to be subject to the same threats that challenge any business in a free economy, but they don’t need charity, and that’s what really appeals to me. The economy of the region receives a permanent upgrade, so it can continue to develop from a higher level.

My first field visit in Kenya was to a project that clearly demonstrated the TechnoServe approach in working with banana farmers. TechnoServe and Africa Harvest had been funded by the Rockefeller Foundation to promote banana growing by small farmers north of Nairobi. Africa Harvest is known for its development and promotion of improved banana plants, so it was chosen to help the farmers access, plant, and nurture these plants. TechnoServe’s expertise is in business and value chains, so our focus was on organizing the farmers, training them, and connecting them to reliable markets for their produce.

Although many people believe that successful capitalism just happens, without a push, it can take a very long time. In developing countries, markets are often not efficient or nonexistent, so it’s very easy for value chains to stabilize in suboptimum conditions and not improve. For example, before the Africa Harvest/TechnoServe intervention in Kenya’s banana industry, the value chain operated as follows:

Poor farmers grew bananas primarily as one of their subsistence crops. Sometimes they would produce more than they could consume so would attempt to sell the excess. With no local market for the bananas and no means of transporting them to a major city, smallholders had to rely on random purchases from ad hoc traders. These traders would periodically visit banana farms in a particular area and ask farmers if they had any bananas to sell. If the farmers had bananas to sell, they were at the trader’s mercy in terms of the selling price. If the trader did not buy, then the bananas would not be sold and would ultimately rot. When the farmer had bananas for sale, the trader would eyeball them for quality and weight and would offer the farmer a price. Usually, the farmer accepted.

Although it sounds as if the traders had the upper hand on the farmers, the system was bad for everyone. The traders could find themselves driving through a rural area with very bad roads, expending their time and fuel money, and finding no bananas for sale. They could also find that the available bananas were only of poor quality and not readily saleable in the urban markets at a good price. All transactions were opportunistic. Supply, price, demand, and frequency of transactions were all random. And the most important fact to note about this situation was that none of the small participants involved could change it! Economists call this a market failure. No one had the resources to rationalize and improve the value chain. Without outside intervention, this value chain could have continued in its inefficient state indefinitely. Free markets are great, but sometimes they fail.

TechnoServe’s first step in changing this situation was overcoming a psychological hurdle. In this region, most everyone grew bananas because they were easy to grow and a good source of nutrition for their families. Since everyone grew bananas, many farmers could not understand how bananas could be grown as a reliable and worthwhile cash crop. They didn’t think about the four million inhabitants of Nairobi only fifty miles away who had no farmland. And if they had thought about those potential buyers, it would have seemed a dream that they could connect with them. As individual farmers became convinced of the opportunity, they were encouraged to purchase the new varieties of banana plants, to plant them carefully, in sufficient quantity, and to nurture them with appropriate water, fertilizer, and pruning. By following good direction, the farmers were able to produce excellent quality bananas in consistent volumes. However, better bananas in larger quantities were not sufficient. Many past economic development initiatives had taught farmers how to produce more and better crops but had not connected them to markets to sell their newfound abundance. Without connection to a market, a farmer just ends up throwing away more produce. This project was different. It attacked the overall value chain problem from both ends.

While farmers were being taught to grow more and better bananas, TechnoServe was also developing the demand side of the value chain. Banana wholesalers from Nairobi were recruited to visit the banana farming area with the promise of consistent availability of large volumes of high-quality bananas. This was attractive to the wholesalers because it allowed them to reduce their costs for finding high-quality bananas. The consistent availability also made the wholesalers into reliable suppliers to their retail customers. As the two ends of the value chain came together, the farmers and the wholesalers agreed on specific market days to meet and conduct their transactions. They also agreed to price bananas by weight and grade (quality level). Certain individuals within the farming community were trained to become official banana graders. After the new system began operating successfully, a physical market building and surrounding fenced yard were constructed for the collection, overnight storage, weighing and grading of the bananas on market days. The whole system, although seemingly incredibly simple, had become a tremendous success.

The wonderful thing was that these were real markets, just like those in the economics textbooks. Supply and demand were matched up reliably on a consistent basis, and this is the most important aspect for farmers who are trying to climb out of poverty. Although everyone involved anticipated that the most important result coming from this project would be that farmers were getting better prices for the bananas, it hadn’t been the case. The most important result for farmers had been the certainty and regularity of income. Farmers now knew that if they produced good bananas, they could sell them. That allowed families to plan their finances rather than being constantly uncertain as to whether they could afford to purchase clothing or pay school fees for the children. Many of the farmers had doubled their income. Needless to say, I was very excited with the project and what it had been able to accomplish.

As part of the banana trip, we got to see the actual market taking place with bananas being graded and weighed. We also visited several banana farms to see their growing techniques including, in some cases, new irrigation systems. The irrigation systems had been purchased with the farmers’ increased incomes enabling them to produce more bananas in the dry season when selling prices are the highest.

As an aside, as we drove around the area, I noticed a large compound with a very nice house at the center. I inquired as to who owned this impressive homestead and was told that it was the local MP (member of parliament). I asked, somewhat tongue-in-cheek, if this person had been wealthy before becoming an MP. Everyone in the car laughed loudly and said of course not.

A few days after the banana trip, Wendy arrived in Kenya and learned what her work for the next year would entail. While about 80 percent of TechnoServe Kenya’s project work related to agricultural value chains, such as the banana project, the remaining 20 percent was focused on more general entrepreneurship and consisted of three specific initiatives: Young Women in Enterprise, a national Believe, Begin, Become (BBB) business plan competition, and a small business growth program called “Upscaling.” Wendy would spend her time in Nairobi working on all three. The projects were a good fit with her interests and leveraged her experience in business plus the lessons learned in Swaziland

The banana trip had meant a two-hour drive each way on relatively bad roads. The week after Wendy arrived, she and I went with the TechnoServe Upscaling team for a three-hour drive each way over worse roads. Wendy was starting to help this team in supporting very small businesses to identify and overcome the barriers that prevented them from growing and creating more jobs. Our first visit was to a small honey processing company. It was owned by Mr. and Mrs. Ndambuki but had really been started by the wife. The husband was a pharmacist, and the couple had owned and operated a pharmacy in a small town for many years. They were not rich, but seemed to have a good and stable income, which put them in a better position than most. The honey business was a recent start-up. The honey business had begun serendipitously when an old acquaintance of the wife had come to town in desperate financial condition. Before moving to town, the wife had come from a not too distant rural area. This rural area was quite poor, and the local farmers were always at the mercy of the weather, which that year had not been good for the crops. Many of the farmers were struggling to feed their families. Fortunately, some of the farmers kept bees, which produced saleable honey. Although this honey had usually been consumed by the families, her friend had come to town to sell what he could to buy staples. The wife bought the honey, primarily out of charity, and the desire to preserve her friend’s dignity. She then had to figure out what she would do with it. Since it was too much to personally consume, she decided to process it and sell it in the pharmacy. It worked and she decided to help more of the struggling farmers by purchasing more honey. She processed and sold their honey, and her husband even developed a cough syrup and other pharmaceutical products that incorporated honey.

Mr. and Mrs. Ndambuki now had an additional small business with only one full-time employee, but both were enthusiastic about it because it had been able to help a number of poor farmers. The business had been able to generate enough profits to provide the small amount of cash required for simple equipment and working capital. While it hadn’t contributed to the couple’s disposable income, it hadn’t been a cash drain. They wanted to expand, and that’s how TechnoServe was helping them. The TechnoServe business advisors had helped them to formally register their company and to develop accurate financial statements. Both of these were always prerequisites for obtaining any kind of financing, which the company expected to need soon for growth. The honey business also needed a strategy if they really wanted to grow. Although they had created a brand and packaging for their honey, like many small businesses we saw, their products were mostly undifferentiated.

Many of TechnoServe’s clients sell mostly undifferentiated raw agricultural produce, which is fine if there is a sufficient market and you’re willing to accept the prices that the market offers. However, trying to sell processed, packaged goods is more challenging. To sell these goods, ultimately a consumer will have to choose your product from a retail shelf, where it usually sits competing for attention with other similar products. How do you get the consumer to choose your product or even get the retailer to put your product on his shelf ? It is very difficult to break into supermarkets with this type of product when they already have multiple competing brands on the shelf. Selling honey wasn’t as bad as trying to set up a