With the world population ballooning, without matching food production, the world is head for a serious food crisis. Many concerned individuals, groups and companies are taking measures to avert the situation. Out of Nigeria comes one of such measure.
In
one of West Africa's most turbulent countries, HBS alumni entrepreneurs
are harnessing the extraordinary power of subsistence farmers. Can they
kick-start a green revolution?
Re: Mr. Bukola L. Masha (MBA 2006); Mrs. Ndidi O. Nwuneli (MBA 1999); Mr. Udemezuo O. Nwuneli (MBA 2003)
Photography by Jason Andrew
by Francis Storrs
Ibrahim Mustapha grows maize in Katsina Fulani, a village of mud-brick houses topped by rusted corrugated roofs in northern Nigeria.
Like millions of farmers in his country, Mustapha is a "smallholder";
he and his family grow their crop on a 1.1-hectare farm, a plot roughly
the size of a rugby field. The 50-year-old has been farming this
small-scale way all his life, and he's been taken advantage of just
about as long.
The Nigerian government, long considered one of the most corrupt on
the African continent, had controlled the nation's seed and fertilizer
industries for decades. And even though Mustapha and his sons had earned
a reputation as hard workers, there was only so much they could produce
within a system that left farmers either chronically undersupplied or
dealing with bags of fertilizer cut with sand to meet labeled weights.
In a given year, Mustapha would be lucky to harvest 1.4 metric tons of
maize—one-fifth the yield farmers in Brazil and China can expect. To
match their production, he'd need to invest about $500 per hectare. But
Mustapha earned only around $600 a year—and that was if the weather
cooperated.
In 2012, the weather did not cooperate. That year was among the
rainiest on record, flooding more than 2 million hectares in northern
Nigeria. Yet that December, Mustapha harvested 4.6 metric tons of maize,
about triple his annual average. After saving some for his family and
selling the rest, he netted an unimaginable $1,350. "I have plenty of
money in my pocket and healthy maize for my family to eat," Mustapha
said then. "My children are already looking healthier—I can barely lift
my eight-year-old. He's the fattest in the village."
On a continent more likely to evoke save-the-children appeals than
thoughts of agricultural innovation, Ibrahim Mustapha is at the vanguard
of what could be a green revolution. He belongs to a new farming
program called Babban Gona, the brainchild of
Kola Masha (MBA 2006)
that is aggressively transforming Nigerian subsistence farmers into
commercial growers. By harnessing the largely untapped power of
smallholders—increasing their yields, rebuilding supply chains, and
opening access to economies of scale—Masha believes he is on the way to
helping more than a million Nigerian farmers climb out of poverty.
Ibrahim Mustapha's farm tripled its annual harvest last year with help from Kola Masha's innovative franchise model.
It's a revolution that can't come soon enough for Nigeria. The
country was once the breadbasket of West Africa until Royal Dutch Shell
discovered vast oil reserves in 1958, and the agriculture sector began
to wither from neglect. Now, nearly half of Nigerian children under five
are undernourished, even as broken supply chains mean that up to a
third of produce is wasted. The World Bank esimates that some 22 percent
of the nation's 175 million people are unemployed; half of 15- to
24-year-olds in urban areas can't find work. Some are turning to
terrorist groups such as Boko Haram, which at least promise something to
eat.
Meanwhile, the Nigerian population is exploding. "Over the next 20
years, we have to generate 80 million jobs," Masha says. "That's the
population of Germany, the world's fourth-largest economy." But endemic
corruption has scared off many foreign companies. "Nigeria is a
nightmare country. Things just don't seem to work well there," says
Nancy Barry (MBA 1975),
founder and president of Enterprise Solutions to Poverty, which
mobilizes and supports leading companies and entrepreneurs in building
profitable and inclusive businesses that incorporate millions of
low-income people. "The biggest problem is not just infrastructure, it's
government and corruption and trying to get rules that people abide
by," adds
Ray Goldberg,
the George M. Moffett Professor of Agriculture and Business, Emeritus,
at Harvard Business School, who conducts research in West Africa.
"Because Nigeria itself has been such a frequent violator of so many of
these things, people look on it as the most difficult country to
change."
And yet, a shift appears under way. A new reformist government has
started treating agriculture as a problem to be solved by industry
rather than by aid. Private companies are springing up throughout the
food chain, from factories that produce fertilizer, to investors like
Masha working directly with farmers, to retail-focused suppliers
rebuilding local appetite for food grown in their country.
Universal among these agribusiness entrepreneurs is a core belief:
The answer to feeding Nigeria—and once that's accomplished, perhaps
helping to feed the world—lies in finding ways to transform subsistence
farmers into entrepreneurs. The global population is hurtling toward 9
billion by 2050, according to the World Bank, and feeding all those
people will require a 70 percent increase in agricultural productivity.
The existing system of multinational megafarms won't be enough—the hope
for the future lies not in mass production, but in production by the
masses.
And that's where Nigeria comes in. With only 40 percent of its arable
land currently used by farmers, a more-than-ample water supply, and an
exploding youth population that promises a vast supply of labor, there
is potential unrivaled almost anywhere else in the world. "The whole
country seems to be waking up to the fact that they have more natural
resources than many other countries and more opportunities than ever in
their history," Goldberg says. "They are ripe for enormous revolution."
To witness the limits
of government intervention, Nigerians once needed to look no further
than the state-owned National Fertilizer Company of Nigeria (NAFCON).
According to federal estimates, only 11 percent of its subsidized
fertilizer reached poor farmers; middlemen skimmed off much of the rest,
often to sell to big farmers with deep pockets. The NAFCON factory
closed in 1999 and fell into disrepair. It stayed that way until 2005,
when
Onajite Okoloko (OPM 37, 2008)
and a team of investors bought the shuttered plant and got it up and
running again. Adopting a local word for "genesis," Okoloko would call
his new company Notore Chemical Industries Ltd.
Looking for professional managers two years later, Okoloko contacted
Kola Masha, whom he'd met through a mutual friend. Masha had just
graduated from HBS and was working at a medical-device company in
Massachusetts. Okoloko's call came at the right time. Professionally,
Masha was eager to join a start-up; personally, he'd resolved to move
closer to his aging parents in Nigeria. At the end of the two-hour phone
call, Masha knew he would be returning home.
In 2007, the two businessmen worked with a group of Nigerian banks to
complete the consolidation of a $222 million loan—the largest in
Nigeria's history—to rehabilitate the Notore plant. In 2009, a decade
after NAFCON went dark, Okoloko brought it back online. "The African
Green Revolution has indeed begun," he said at the launch.
From the beginning, Notore focused on Nigeria's smallholder farmers,
who use about a tenth of the fertilizer of their peers elsewhere.
Because farmers making a dollar or two a day couldn't afford the
standard 50-kilogram bags, Notore started packaging the fertilizer in 1-
and 10-kilogram sizes, and reinforced the stitching to prevent
middlemen from breaking into them. To reach farmers outside the trading
areas, Notore trained more than a thousand "Village Promoters," who sold
fertilizer and used demonstration plots to establish its efficacy. Most
important of all, they showed farmers that Notore and its products
could be trusted.
Earning confidence among trading partners is a slow but essential
enterprise in professionalizing agriculture, especially in a country
like Nigeria where small farmers have historically had so little to
depend on. "How do you go from a state of corruption to an orderly
market?" says
David E. Bell,
successor to Ray Goldberg as the Moffett Professor of Agriculture and
Business. "I think it has to start with you and me trusting each other.
Then we find someone else we can trust, and they find others. Eventually
there's an alternative economy of people who trust each other." The
Village Promoter program, spearheaded by Masha, grew this way,
eventually reaching about 58,000 small farmers. Overall, Notore's
products and activities have impacted the lives of more than 14 million
farming families and counting.
The six months Masha spent traveling the countryside to set up the
Village Promoter program helped him see the scale of the challenges
facing Nigerian farmers. The biggest problem wasn't the labor force—he'd
never seen anyone work harder—it was a fragmented support system that
no one could seem to fix. "The problems facing Nigeria and West Africa
are too great for the public sector or traditional NGOs to solve," says
Masha. "The private sector can make a much more concerted, long-term
effort to address these issues while simultaneously doing what it does
every day, which is make money."
After leaving Notore in 2010 to set up his own investment group,
Doreo Partners, Masha spent a short stint as chief of staff for
Nigeria's agriculture minister, Akinwumi Adesina, helping develop a
deregulation and investment program, the Agricultural Transformation
Agenda, that seeks to create 3.5 million agriculture jobs and add 20
million metric tons of produce to the domestic food supply by 2015.
(Adesina says they're already more than halfway to those goals.) In an
innovative initiative developed at Notore, and now being studied by
Brazil and India, the government has begun delivering subsidy vouchers
electronically to more than 10 million farmers, a measure that has
increased the amount of fertilizer that makes it to smallholders from 11
percent to 94 percent.
Masha returned to Doreo in late 2011, now able to launch the
end-to-end investment he had imagined. He calls Babban Gona—which means
"great farm" in the Hausa language of northern Nigeria—an agricultural
franchise model, and it works much like a fast-food franchise: Babban
Gona trains farmers-franchisees and offers them loans, then delivers
seed and fertilizer directly to the farms on credit; district managers
track production and dispense advice throughout the season. At harvest,
Babban Gona provides transportation and support, including access to
tractors that can do in one hour what would take a farmer 10 days to do
by hand, and even the sacks, the needle, and the thread to package the
maize. Masha's company warehouses the grain at the end of the process,
commoditizes it, and sells it to food conglomerates like Nestlé, which
uses it to make baby food and breakfast cereal sold in Nigeria and
abroad. Babban Gona then pays the farmers via a quarterly dividend
payment. The system won the first annualHBS Association of Nigeria New
Venture Competition for the West Africa region last year.
But improving farming conditions also required some upfront capital,
and because many smallholders don't have clear title to their land—and
therefore no collateral—banks are loath to lend them the funds they
need. To unlock financing for his initiative, Masha turned to his friend
Ladi Balogun (MBA 2000),
CEO and group managing director of Nigeria's First City Monument Bank,
which loans against measures like warehouse receipts. At the height of
the growing season, First City has 9 percent of its $2.7 billion loan
book invested in agriculture, compared to a national bank average of 3
percent. "There are millions of farmers that [still] need credit at
affordable rates," Balogun says, adding that his bank expects lending to
increase 21 percent a year for the next three years.
Here's what all of that looks like in practice: With a $500 input
loan, 22-year-old Jamila Josua was able to afford much higher-quality
materials for her 1.6-acre farm in the village of Nakala. And just as
McDonald's trucks raw food to its franchisees from a distribution
center, Babban Gona delivered those inputs directly to Josua's door,
including 3 bags of improved seed, 14 bags of fertilizer (much of it
from Notore), and 10 liters of herbicide. Because she is one of hundreds
of Babban Gona farmers, and the system leverages economies of scale,
all of these things come much cheaper.
To help protect Babban Gona's investment, a district manager visits
Josua's farm and others in her immediate network, or Trust Group, twice a
month (once announced, once not). That person, trained in agronomy and
business, dispenses advice on everything from best practices to business
ethics, while keeping track of growth rates and other performance
measures with a smartphone app. This process also de-risks the loans in
the eyes of banks. When the Nigerian government ran a loan program in
the 1990s, the partial default rate reached as high as 73 percent. By
comparison, 99.5 percent of the loans to Babban Gona farmers were
repaid
last season.
"Through this whole system, we've been able to demonstrate that we
can get farmers a loan 50 percent cheaper than they can get themselves,
and inputs that are 19 percent cheaper," says Masha. "We get them the
knowledge to increase their yields up to three times the national
average, and sell their produce for about 37 percent higher than what
they can get themselves."
When Masha takes a moment to think back on what he's accomplished so
far, his mind turns to his family's own history. His American mother was
raised on a farm in South Dakota. Her father was poor, like most
farmers in his community, but by the 1950s his fortunes had been
reversed by working with a farming collective. "He had a larger farm, a
tractor," Masha says. "He made enough money to send my mom to college."
Babban Gona farmers are beginning to experience similar benefits.
Some have been able to buy cars and put new roofs on their homes; one is
preparing to buy a tractor for his fellow members to share, another is
sending his children to private school. The program is helping a farmer
with 2 hectares secure financing to expand to 14—enough to earn him
$10,000 a year. "It's been wonderful to see," Masha says.
As Nigeria struggles to
crack the problem of feeding itself, boosting production is only half
of the solution—the other half is convincing skeptical Nigerian
consumers to eat what its farmers grow.
A couple of summers ago,
Ndidi Okonkwo Nwuneli (MBA 1999)
saw this dilemma firsthand when she stopped by a small restaurant
outside Lagos in southwest Nigeria, not far from the home she shares
with her husband,
Mezuo Nwuneli (MBA 2003).
It was a neighborhood place, and she wanted to know where the chef got
ingredients such as produce and chicken. It turned out that they were
bought at a nearby market, but actually originated from abroad.
Decades of corruption and haphazard regulations have conditioned
consumers to see local food as overpriced and inferior, which it often
is. (It's also sometimes dangerous: An estimated 20,000 people died in
2008 from eating produce treated with poisonous chemicals.) As a result,
90 percent of processed food in Nigerian restaurants and supermarkets
comes from ingredients grown somewhere else.
"Changing mindsets among the local populace that 'Made in Nigeria'
products, especially food, are high quality and suitable for consumption
has proved difficult," says Ndidi. To change people's minds, she and
Mezuo have decided to change the marketplace.
In 2009, the couple launched a start-up agribusiness called AACE Food
Processing & Distribution Ltd., which buys bulk spices and other
ingredients, then processes and packages them to sell to local
customers. "Our vision," they say, "is to be the preferred provider of
food for West Africans."
Ndidi and Mezuo, both children of university professors, approach the
ambitious challenge with a combination of academic rigor and devotion
to social justice. At HBS, Ndidi did a field study project with the
Center for Women & Enterprise, founded by
Andrea Silbert (MBA 1991/MPA 1992)—an
experience Ndidi says directly inspired her pre-AACE work launching
several Nigerian nonprofits devoted to social entrepreneurship. During
his time at HBS, Mezuo served as co-president of the Africa Business
Club and worked with the admissions office to develop and implement new
strategies for attracting more students from the continent. Both always
knew they would ultimately return to their home country to try to
address hunger and build Nigerian enterprises.
The couple is using their investment firm, Sahel Capital, to attack
the problem in two different ways. The first is through AACE. The second
is by managing the new $100 million Fund for Agricultural Financing in
Nigeria, a partnership between Adesina's Federal Ministry of Agriculture
and Rural Development and Germany's KfW development bank. Starting this
year, the fund will make investments in small- and medium-sized
agricultural enterprises that hold great promise. "We have always been
driven to transform the landscapes in which we have worked," says Mezuo.
In Nigeria today, "there are tremendous opportunities to transform the
landscape by supporting smallholder farmers and providing growth capital
to agribusiness-focused entrepreneurs."
When the Nwunelis started AACE, they experimented by sourcing their
spices from local markets, similar to the one used by the restaurant
Ndidi visited. But they soon ran into the same problems faced by other
food companies: inconsistent supplies, opaque pricing structures, and
mixed quality. But instead of turning to outside suppliers, they turned
inward, building relationships directly with smallholder farmers and
farmer collectives.
Like Masha and Okoloko of Notore, the Nwunelis believe in the benefit
of working to build shared value over the long term. AACE provides
groups like the Jaba Ginger Farmers Cooperative Society—which is made up
of 3,000 smallholders, more than half of them women—with a trustworthy
customer. In return, by sourcing ginger and chili pepper locally, AACE
has been able to reduce purchasing costs of the spices by as much as 30
percent, savings it passes on to consumers.
The Seeds of Agribusiness
In the 1950s, agricultural economics professor Ray Goldberg went to
his dean at Harvard Business School to pitch a new kind of conference.
For the first time, it would bring together players from all parts of
the supply chain—subsistence farmers to multinational conglomerates,
seed sellers to supermarket buyers—to share insights and piece together a
perspective on the global food system. The resulting executive
Agribusiness Seminar, which held its 54th installment in January, now
brings to HBS each year more than 200 leaders from places like the
Department of Agriculture, the World Bank, Monsanto, ConAgra, and
Walmart. They come, Goldberg says, because "this is the only place where
these groups can talk to each other."
Another reason people travel from around the world, though Goldberg
is too modest to say so, is to learn from a giant of their industry.
Goldberg, together with his late HBS colleague
John H. Davis,
codeveloped the field of agribusiness, teaching the first course on the
subject in 1955. At the time, agricultural businesses tended to focus
narrowly on their particular jobs, but the professors argued that
agricultural was a social, economic and political enterprise, and
studying the entire system would lead to better decisions. This magazine
named the publication of their 1957 textbook,
A Concept of Agribusiness,
one of the 20 most-influential milestones in HBS history, and today
there are more than 100 agribusiness programs offered at colleges and
universities around the world.
Considered HBS's most prolific professor, Goldberg is the author,
coauthor, or editor of 23 books, more than 100 articles, and more than
1,000 cases. He has taught nearly 20,000 students MBA students and
Executive Education participants. One of his doctoral students,
Michael Halse (MBA 1957, DBA 1979),
helped lead the White Revolution in India in the 1970s and '80s,
replacing an inept state-run dairy system with a farmer's cooperative
now called Amul, one of the world's largest producers of milk.
These days, Goldberg has witnessed a resurgence of interest in
agricultural entrepreneurship at HBS and elsewhere. "The students have
rediscovered food, agriculture, and economic development as something
exciting," he says. They've seen that agribusiness doesn't have to be
entirely adversarial, but that buyers and sellers along the food chain
can benefit from cooperation based on trust. "The world has finally,
finally got it," the 87-year-old Goldberg says. "I'm just glad I was
here to see it."
The Nwunelis' system is tapping into a change to the Nigerian
consumer base: The middle class of Africa's most populous nation has
been growing quickly, now accounting for 23 percent of the population,
according to the African Development Bank. "There has to be a big middle
class" to support this kind of retail effort, says HBS professor David
Bell. "If you have a society where there are only rich people and poor
people, the rich people can afford to simply eat imported food, while
the lower class lives off the farm."
Tracking the rise of the middle class, AACE started small but has
grown quickly. In 2010, its first year up and running, the company sold 6
tons of product, and then more than quadrupled sales the following
year. In 2012, a year the company invested in a dedicated processing
facility, it sold more than 70 tons, and were on track to source 100
tons from smallholders in 2013. In the future, the systems the Nwunelis
are putting into place can be adapted to all sorts of nutritious
foods—AACE has added soybeans, maize, and sorghum to its product
line—but spices have proven to be an effective proof of concept. It now
sells products to customers in 6 of Nigeria's 36 states, including
noodle companies, fast-food chains, and more than 30 supermarkets. AACE
expects to directly employ 65 people within the next five years, and buy
food from 1,000 farmers within the next three.
By systematizing new agricultural pathways that lead all the way to
consumers, the Nwunelis hope that AACE will show that outside companies
can succeed in Nigeria. Private industry seems to be redoubling efforts
to invest in the country, after writing it off as impossible for some
time. Cargill, for example, is working with smallholder farmers and
investing in a plant to produce sweeteners from cassava, another
important crop in the country. In 2012, SABMiller opened a $100 million
brewery, its fourth facility in the country. Africa's richest man,
Nigerian-born Aliko Dangote, is putting some $80 million into processing
factories for fruit and tomatoes, two crops Nigeria produces in
abundance yet spends hundreds of millions of dollars a year importing.
If Nigeria hopes to regain its ability to one day become a major
exporter, its success will depend on testing its supply chains on the
local market. That's how agricultural economies work out the kinks that
accompany building up large-scale capacity. "If you look at the
economies that have really become agricultural powerhouses, they built
that global capacity off of a large internal market," says Masha.
"That's how Brazil did it, that's how Thailand did it, that's how the US
did it. They were all able to leverage their large internal markets to
become major exporters."
It's about 7:30 in the evening
in Nigeria, and Kola Masha sounds exhausted. Harvest is shifting into
high gear, and he was working until 3:30 that morning, helping Babban
Gona farmers stack 100-kilogram sacks of maize in a warehouse. Doreo
Partners is still very much a hands-on company, even for its managing
director. It's the second week of November, and a tractor-trailer full
of maize is arriving every day from about 50 farms within a 20-mile
radius. The same thing is happening at Doreo's six other warehouses, and
it will continue that way deep into December. Being tired is a good
problem to have.
Today, Masha has some particularly good news. As he tallies sacks of
maize, he's seeing yields of up to 6.8 metric tons per hectare, which is
about five times the national average and eight times the average in
this part of the country. It's not yet time to harvest the farm of
Ibrahim Mustapha—that smallholder with the chubby eight-year-old—but a
yield assessment conducted earlier in the season showed he'll easily
exceed 6 tons, which will break last season's record by 30 percent.
In the old way of doing things, Masha and his farmers would be in a
simple trading relationship. He would look to get the lowest price from
them, while they looked to get the highest price from him—someone wins
and someone loses. But farming can't operate that way these days in
Africa, says Nancy Barry, former president of Women's World Banking, an
organization that has extended microfinancing to more than 20 million
low-income entrepreneurs. "In agribusiness," she says, "you have to
create win-wins, or it's not going to work." With Babban Gona, Masha
believes he has created just that, working with the farmers as partners
to bring up yields and increase his supply to customers.
This is something that Masha's biggest customer, Nestlé, has long
understood. "In order to get milk locally for its products, Nestlé
realized it had to be the one to train the farmers in production, in
making sure the milk was safe, in how to manage the business," says
Bell. "Nestlé benefited and the farmer benefited." Like Cargill,
SABMiller, and other multinational firms, Nestlé—which now works with
nearly a million smallholder farmers across West Africa—realizes that
the future of meeting the globe's skyrocketing food needs lies in
cooperation and a new model of agriculture. "As more and more companies
figure out that this is the new capitalism," says Barry, "they'll make
the private sector exceedingly well-positioned to make a difference."
But until those forward-thinking multinational giants are the rule
rather than the exception, agriculture will need designs like Kola
Masha's—ideas that help Ibrahim Mustapha feed his family of six and
along the way, potentially pioneer a way to help feed millions.
Post Credits
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With the world population ballooning, without matching food production, the world is head for a serious food crisis. Many concerned individuals, groups and companies are taking measures to avert the situation. Out of Nigeria comes one of such measure.
In
one of West Africa's most turbulent countries, HBS alumni entrepreneurs
are harnessing the extraordinary power of subsistence farmers. Can they
kick-start a green revolution?
Re: Mr. Bukola L. Masha (MBA 2006); Mrs. Ndidi O. Nwuneli (MBA 1999); Mr. Udemezuo O. Nwuneli (MBA 2003)
Photography by Jason Andrew
by Francis Storrs
Ibrahim Mustapha grows maize in Katsina Fulani, a village of mud-brick houses topped by rusted corrugated roofs in northern Nigeria.
Like millions of farmers in his country, Mustapha is a "smallholder";
he and his family grow their crop on a 1.1-hectare farm, a plot roughly
the size of a rugby field. The 50-year-old has been farming this
small-scale way all his life, and he's been taken advantage of just
about as long.
The Nigerian government, long considered one of the most corrupt on
the African continent, had controlled the nation's seed and fertilizer
industries for decades. And even though Mustapha and his sons had earned
a reputation as hard workers, there was only so much they could produce
within a system that left farmers either chronically undersupplied or
dealing with bags of fertilizer cut with sand to meet labeled weights.
In a given year, Mustapha would be lucky to harvest 1.4 metric tons of
maize—one-fifth the yield farmers in Brazil and China can expect. To
match their production, he'd need to invest about $500 per hectare. But
Mustapha earned only around $600 a year—and that was if the weather
cooperated.
In 2012, the weather did not cooperate. That year was among the
rainiest on record, flooding more than 2 million hectares in northern
Nigeria. Yet that December, Mustapha harvested 4.6 metric tons of maize,
about triple his annual average. After saving some for his family and
selling the rest, he netted an unimaginable $1,350. "I have plenty of
money in my pocket and healthy maize for my family to eat," Mustapha
said then. "My children are already looking healthier—I can barely lift
my eight-year-old. He's the fattest in the village."
On a continent more likely to evoke save-the-children appeals than
thoughts of agricultural innovation, Ibrahim Mustapha is at the vanguard
of what could be a green revolution. He belongs to a new farming
program called Babban Gona, the brainchild of
Kola Masha (MBA 2006)
that is aggressively transforming Nigerian subsistence farmers into
commercial growers. By harnessing the largely untapped power of
smallholders—increasing their yields, rebuilding supply chains, and
opening access to economies of scale—Masha believes he is on the way to
helping more than a million Nigerian farmers climb out of poverty.
Ibrahim Mustapha's farm tripled its annual harvest last year with help from Kola Masha's innovative franchise model.
It's a revolution that can't come soon enough for Nigeria. The
country was once the breadbasket of West Africa until Royal Dutch Shell
discovered vast oil reserves in 1958, and the agriculture sector began
to wither from neglect. Now, nearly half of Nigerian children under five
are undernourished, even as broken supply chains mean that up to a
third of produce is wasted. The World Bank esimates that some 22 percent
of the nation's 175 million people are unemployed; half of 15- to
24-year-olds in urban areas can't find work. Some are turning to
terrorist groups such as Boko Haram, which at least promise something to
eat.
Meanwhile, the Nigerian population is exploding. "Over the next 20
years, we have to generate 80 million jobs," Masha says. "That's the
population of Germany, the world's fourth-largest economy." But endemic
corruption has scared off many foreign companies. "Nigeria is a
nightmare country. Things just don't seem to work well there," says
Nancy Barry (MBA 1975),
founder and president of Enterprise Solutions to Poverty, which
mobilizes and supports leading companies and entrepreneurs in building
profitable and inclusive businesses that incorporate millions of
low-income people. "The biggest problem is not just infrastructure, it's
government and corruption and trying to get rules that people abide
by," adds
Ray Goldberg,
the George M. Moffett Professor of Agriculture and Business, Emeritus,
at Harvard Business School, who conducts research in West Africa.
"Because Nigeria itself has been such a frequent violator of so many of
these things, people look on it as the most difficult country to
change."
And yet, a shift appears under way. A new reformist government has
started treating agriculture as a problem to be solved by industry
rather than by aid. Private companies are springing up throughout the
food chain, from factories that produce fertilizer, to investors like
Masha working directly with farmers, to retail-focused suppliers
rebuilding local appetite for food grown in their country.
Universal among these agribusiness entrepreneurs is a core belief:
The answer to feeding Nigeria—and once that's accomplished, perhaps
helping to feed the world—lies in finding ways to transform subsistence
farmers into entrepreneurs. The global population is hurtling toward 9
billion by 2050, according to the World Bank, and feeding all those
people will require a 70 percent increase in agricultural productivity.
The existing system of multinational megafarms won't be enough—the hope
for the future lies not in mass production, but in production by the
masses.
And that's where Nigeria comes in. With only 40 percent of its arable
land currently used by farmers, a more-than-ample water supply, and an
exploding youth population that promises a vast supply of labor, there
is potential unrivaled almost anywhere else in the world. "The whole
country seems to be waking up to the fact that they have more natural
resources than many other countries and more opportunities than ever in
their history," Goldberg says. "They are ripe for enormous revolution."
To witness the limits
of government intervention, Nigerians once needed to look no further
than the state-owned National Fertilizer Company of Nigeria (NAFCON).
According to federal estimates, only 11 percent of its subsidized
fertilizer reached poor farmers; middlemen skimmed off much of the rest,
often to sell to big farmers with deep pockets. The NAFCON factory
closed in 1999 and fell into disrepair. It stayed that way until 2005,
when
Onajite Okoloko (OPM 37, 2008)
and a team of investors bought the shuttered plant and got it up and
running again. Adopting a local word for "genesis," Okoloko would call
his new company Notore Chemical Industries Ltd.
Looking for professional managers two years later, Okoloko contacted
Kola Masha, whom he'd met through a mutual friend. Masha had just
graduated from HBS and was working at a medical-device company in
Massachusetts. Okoloko's call came at the right time. Professionally,
Masha was eager to join a start-up; personally, he'd resolved to move
closer to his aging parents in Nigeria. At the end of the two-hour phone
call, Masha knew he would be returning home.
In 2007, the two businessmen worked with a group of Nigerian banks to
complete the consolidation of a $222 million loan—the largest in
Nigeria's history—to rehabilitate the Notore plant. In 2009, a decade
after NAFCON went dark, Okoloko brought it back online. "The African
Green Revolution has indeed begun," he said at the launch.
From the beginning, Notore focused on Nigeria's smallholder farmers,
who use about a tenth of the fertilizer of their peers elsewhere.
Because farmers making a dollar or two a day couldn't afford the
standard 50-kilogram bags, Notore started packaging the fertilizer in 1-
and 10-kilogram sizes, and reinforced the stitching to prevent
middlemen from breaking into them. To reach farmers outside the trading
areas, Notore trained more than a thousand "Village Promoters," who sold
fertilizer and used demonstration plots to establish its efficacy. Most
important of all, they showed farmers that Notore and its products
could be trusted.
Earning confidence among trading partners is a slow but essential
enterprise in professionalizing agriculture, especially in a country
like Nigeria where small farmers have historically had so little to
depend on. "How do you go from a state of corruption to an orderly
market?" says
David E. Bell,
successor to Ray Goldberg as the Moffett Professor of Agriculture and
Business. "I think it has to start with you and me trusting each other.
Then we find someone else we can trust, and they find others. Eventually
there's an alternative economy of people who trust each other." The
Village Promoter program, spearheaded by Masha, grew this way,
eventually reaching about 58,000 small farmers. Overall, Notore's
products and activities have impacted the lives of more than 14 million
farming families and counting.
The six months Masha spent traveling the countryside to set up the
Village Promoter program helped him see the scale of the challenges
facing Nigerian farmers. The biggest problem wasn't the labor force—he'd
never seen anyone work harder—it was a fragmented support system that
no one could seem to fix. "The problems facing Nigeria and West Africa
are too great for the public sector or traditional NGOs to solve," says
Masha. "The private sector can make a much more concerted, long-term
effort to address these issues while simultaneously doing what it does
every day, which is make money."
After leaving Notore in 2010 to set up his own investment group,
Doreo Partners, Masha spent a short stint as chief of staff for
Nigeria's agriculture minister, Akinwumi Adesina, helping develop a
deregulation and investment program, the Agricultural Transformation
Agenda, that seeks to create 3.5 million agriculture jobs and add 20
million metric tons of produce to the domestic food supply by 2015.
(Adesina says they're already more than halfway to those goals.) In an
innovative initiative developed at Notore, and now being studied by
Brazil and India, the government has begun delivering subsidy vouchers
electronically to more than 10 million farmers, a measure that has
increased the amount of fertilizer that makes it to smallholders from 11
percent to 94 percent.
Masha returned to Doreo in late 2011, now able to launch the
end-to-end investment he had imagined. He calls Babban Gona—which means
"great farm" in the Hausa language of northern Nigeria—an agricultural
franchise model, and it works much like a fast-food franchise: Babban
Gona trains farmers-franchisees and offers them loans, then delivers
seed and fertilizer directly to the farms on credit; district managers
track production and dispense advice throughout the season. At harvest,
Babban Gona provides transportation and support, including access to
tractors that can do in one hour what would take a farmer 10 days to do
by hand, and even the sacks, the needle, and the thread to package the
maize. Masha's company warehouses the grain at the end of the process,
commoditizes it, and sells it to food conglomerates like Nestlé, which
uses it to make baby food and breakfast cereal sold in Nigeria and
abroad. Babban Gona then pays the farmers via a quarterly dividend
payment. The system won the first annualHBS Association of Nigeria New
Venture Competition for the West Africa region last year.
But improving farming conditions also required some upfront capital,
and because many smallholders don't have clear title to their land—and
therefore no collateral—banks are loath to lend them the funds they
need. To unlock financing for his initiative, Masha turned to his friend
Ladi Balogun (MBA 2000),
CEO and group managing director of Nigeria's First City Monument Bank,
which loans against measures like warehouse receipts. At the height of
the growing season, First City has 9 percent of its $2.7 billion loan
book invested in agriculture, compared to a national bank average of 3
percent. "There are millions of farmers that [still] need credit at
affordable rates," Balogun says, adding that his bank expects lending to
increase 21 percent a year for the next three years.
Here's what all of that looks like in practice: With a $500 input
loan, 22-year-old Jamila Josua was able to afford much higher-quality
materials for her 1.6-acre farm in the village of Nakala. And just as
McDonald's trucks raw food to its franchisees from a distribution
center, Babban Gona delivered those inputs directly to Josua's door,
including 3 bags of improved seed, 14 bags of fertilizer (much of it
from Notore), and 10 liters of herbicide. Because she is one of hundreds
of Babban Gona farmers, and the system leverages economies of scale,
all of these things come much cheaper.
To help protect Babban Gona's investment, a district manager visits
Josua's farm and others in her immediate network, or Trust Group, twice a
month (once announced, once not). That person, trained in agronomy and
business, dispenses advice on everything from best practices to business
ethics, while keeping track of growth rates and other performance
measures with a smartphone app. This process also de-risks the loans in
the eyes of banks. When the Nigerian government ran a loan program in
the 1990s, the partial default rate reached as high as 73 percent. By
comparison, 99.5 percent of the loans to Babban Gona farmers were
repaid
last season.
"Through this whole system, we've been able to demonstrate that we
can get farmers a loan 50 percent cheaper than they can get themselves,
and inputs that are 19 percent cheaper," says Masha. "We get them the
knowledge to increase their yields up to three times the national
average, and sell their produce for about 37 percent higher than what
they can get themselves."
When Masha takes a moment to think back on what he's accomplished so
far, his mind turns to his family's own history. His American mother was
raised on a farm in South Dakota. Her father was poor, like most
farmers in his community, but by the 1950s his fortunes had been
reversed by working with a farming collective. "He had a larger farm, a
tractor," Masha says. "He made enough money to send my mom to college."
Babban Gona farmers are beginning to experience similar benefits.
Some have been able to buy cars and put new roofs on their homes; one is
preparing to buy a tractor for his fellow members to share, another is
sending his children to private school. The program is helping a farmer
with 2 hectares secure financing to expand to 14—enough to earn him
$10,000 a year. "It's been wonderful to see," Masha says.
As Nigeria struggles to
crack the problem of feeding itself, boosting production is only half
of the solution—the other half is convincing skeptical Nigerian
consumers to eat what its farmers grow.
A couple of summers ago,
Ndidi Okonkwo Nwuneli (MBA 1999)
saw this dilemma firsthand when she stopped by a small restaurant
outside Lagos in southwest Nigeria, not far from the home she shares
with her husband,
Mezuo Nwuneli (MBA 2003).
It was a neighborhood place, and she wanted to know where the chef got
ingredients such as produce and chicken. It turned out that they were
bought at a nearby market, but actually originated from abroad.
Decades of corruption and haphazard regulations have conditioned
consumers to see local food as overpriced and inferior, which it often
is. (It's also sometimes dangerous: An estimated 20,000 people died in
2008 from eating produce treated with poisonous chemicals.) As a result,
90 percent of processed food in Nigerian restaurants and supermarkets
comes from ingredients grown somewhere else.
"Changing mindsets among the local populace that 'Made in Nigeria'
products, especially food, are high quality and suitable for consumption
has proved difficult," says Ndidi. To change people's minds, she and
Mezuo have decided to change the marketplace.
In 2009, the couple launched a start-up agribusiness called AACE Food
Processing & Distribution Ltd., which buys bulk spices and other
ingredients, then processes and packages them to sell to local
customers. "Our vision," they say, "is to be the preferred provider of
food for West Africans."
Ndidi and Mezuo, both children of university professors, approach the
ambitious challenge with a combination of academic rigor and devotion
to social justice. At HBS, Ndidi did a field study project with the
Center for Women & Enterprise, founded by
Andrea Silbert (MBA 1991/MPA 1992)—an
experience Ndidi says directly inspired her pre-AACE work launching
several Nigerian nonprofits devoted to social entrepreneurship. During
his time at HBS, Mezuo served as co-president of the Africa Business
Club and worked with the admissions office to develop and implement new
strategies for attracting more students from the continent. Both always
knew they would ultimately return to their home country to try to
address hunger and build Nigerian enterprises.
The couple is using their investment firm, Sahel Capital, to attack
the problem in two different ways. The first is through AACE. The second
is by managing the new $100 million Fund for Agricultural Financing in
Nigeria, a partnership between Adesina's Federal Ministry of Agriculture
and Rural Development and Germany's KfW development bank. Starting this
year, the fund will make investments in small- and medium-sized
agricultural enterprises that hold great promise. "We have always been
driven to transform the landscapes in which we have worked," says Mezuo.
In Nigeria today, "there are tremendous opportunities to transform the
landscape by supporting smallholder farmers and providing growth capital
to agribusiness-focused entrepreneurs."
When the Nwunelis started AACE, they experimented by sourcing their
spices from local markets, similar to the one used by the restaurant
Ndidi visited. But they soon ran into the same problems faced by other
food companies: inconsistent supplies, opaque pricing structures, and
mixed quality. But instead of turning to outside suppliers, they turned
inward, building relationships directly with smallholder farmers and
farmer collectives.
Like Masha and Okoloko of Notore, the Nwunelis believe in the benefit
of working to build shared value over the long term. AACE provides
groups like the Jaba Ginger Farmers Cooperative Society—which is made up
of 3,000 smallholders, more than half of them women—with a trustworthy
customer. In return, by sourcing ginger and chili pepper locally, AACE
has been able to reduce purchasing costs of the spices by as much as 30
percent, savings it passes on to consumers.
The Seeds of Agribusiness
In the 1950s, agricultural economics professor Ray Goldberg went to
his dean at Harvard Business School to pitch a new kind of conference.
For the first time, it would bring together players from all parts of
the supply chain—subsistence farmers to multinational conglomerates,
seed sellers to supermarket buyers—to share insights and piece together a
perspective on the global food system. The resulting executive
Agribusiness Seminar, which held its 54th installment in January, now
brings to HBS each year more than 200 leaders from places like the
Department of Agriculture, the World Bank, Monsanto, ConAgra, and
Walmart. They come, Goldberg says, because "this is the only place where
these groups can talk to each other."
Another reason people travel from around the world, though Goldberg
is too modest to say so, is to learn from a giant of their industry.
Goldberg, together with his late HBS colleague
John H. Davis,
codeveloped the field of agribusiness, teaching the first course on the
subject in 1955. At the time, agricultural businesses tended to focus
narrowly on their particular jobs, but the professors argued that
agricultural was a social, economic and political enterprise, and
studying the entire system would lead to better decisions. This magazine
named the publication of their 1957 textbook,
A Concept of Agribusiness,
one of the 20 most-influential milestones in HBS history, and today
there are more than 100 agribusiness programs offered at colleges and
universities around the world.
Considered HBS's most prolific professor, Goldberg is the author,
coauthor, or editor of 23 books, more than 100 articles, and more than
1,000 cases. He has taught nearly 20,000 students MBA students and
Executive Education participants. One of his doctoral students,
Michael Halse (MBA 1957, DBA 1979),
helped lead the White Revolution in India in the 1970s and '80s,
replacing an inept state-run dairy system with a farmer's cooperative
now called Amul, one of the world's largest producers of milk.
These days, Goldberg has witnessed a resurgence of interest in
agricultural entrepreneurship at HBS and elsewhere. "The students have
rediscovered food, agriculture, and economic development as something
exciting," he says. They've seen that agribusiness doesn't have to be
entirely adversarial, but that buyers and sellers along the food chain
can benefit from cooperation based on trust. "The world has finally,
finally got it," the 87-year-old Goldberg says. "I'm just glad I was
here to see it."
The Nwunelis' system is tapping into a change to the Nigerian
consumer base: The middle class of Africa's most populous nation has
been growing quickly, now accounting for 23 percent of the population,
according to the African Development Bank. "There has to be a big middle
class" to support this kind of retail effort, says HBS professor David
Bell. "If you have a society where there are only rich people and poor
people, the rich people can afford to simply eat imported food, while
the lower class lives off the farm."
Tracking the rise of the middle class, AACE started small but has
grown quickly. In 2010, its first year up and running, the company sold 6
tons of product, and then more than quadrupled sales the following
year. In 2012, a year the company invested in a dedicated processing
facility, it sold more than 70 tons, and were on track to source 100
tons from smallholders in 2013. In the future, the systems the Nwunelis
are putting into place can be adapted to all sorts of nutritious
foods—AACE has added soybeans, maize, and sorghum to its product
line—but spices have proven to be an effective proof of concept. It now
sells products to customers in 6 of Nigeria's 36 states, including
noodle companies, fast-food chains, and more than 30 supermarkets. AACE
expects to directly employ 65 people within the next five years, and buy
food from 1,000 farmers within the next three.
By systematizing new agricultural pathways that lead all the way to
consumers, the Nwunelis hope that AACE will show that outside companies
can succeed in Nigeria. Private industry seems to be redoubling efforts
to invest in the country, after writing it off as impossible for some
time. Cargill, for example, is working with smallholder farmers and
investing in a plant to produce sweeteners from cassava, another
important crop in the country. In 2012, SABMiller opened a $100 million
brewery, its fourth facility in the country. Africa's richest man,
Nigerian-born Aliko Dangote, is putting some $80 million into processing
factories for fruit and tomatoes, two crops Nigeria produces in
abundance yet spends hundreds of millions of dollars a year importing.
If Nigeria hopes to regain its ability to one day become a major
exporter, its success will depend on testing its supply chains on the
local market. That's how agricultural economies work out the kinks that
accompany building up large-scale capacity. "If you look at the
economies that have really become agricultural powerhouses, they built
that global capacity off of a large internal market," says Masha.
"That's how Brazil did it, that's how Thailand did it, that's how the US
did it. They were all able to leverage their large internal markets to
become major exporters."
It's about 7:30 in the evening
in Nigeria, and Kola Masha sounds exhausted. Harvest is shifting into
high gear, and he was working until 3:30 that morning, helping Babban
Gona farmers stack 100-kilogram sacks of maize in a warehouse. Doreo
Partners is still very much a hands-on company, even for its managing
director. It's the second week of November, and a tractor-trailer full
of maize is arriving every day from about 50 farms within a 20-mile
radius. The same thing is happening at Doreo's six other warehouses, and
it will continue that way deep into December. Being tired is a good
problem to have.
Today, Masha has some particularly good news. As he tallies sacks of
maize, he's seeing yields of up to 6.8 metric tons per hectare, which is
about five times the national average and eight times the average in
this part of the country. It's not yet time to harvest the farm of
Ibrahim Mustapha—that smallholder with the chubby eight-year-old—but a
yield assessment conducted earlier in the season showed he'll easily
exceed 6 tons, which will break last season's record by 30 percent.
In the old way of doing things, Masha and his farmers would be in a
simple trading relationship. He would look to get the lowest price from
them, while they looked to get the highest price from him—someone wins
and someone loses. But farming can't operate that way these days in
Africa, says Nancy Barry, former president of Women's World Banking, an
organization that has extended microfinancing to more than 20 million
low-income entrepreneurs. "In agribusiness," she says, "you have to
create win-wins, or it's not going to work." With Babban Gona, Masha
believes he has created just that, working with the farmers as partners
to bring up yields and increase his supply to customers.
This is something that Masha's biggest customer, Nestlé, has long
understood. "In order to get milk locally for its products, Nestlé
realized it had to be the one to train the farmers in production, in
making sure the milk was safe, in how to manage the business," says
Bell. "Nestlé benefited and the farmer benefited." Like Cargill,
SABMiller, and other multinational firms, Nestlé—which now works with
nearly a million smallholder farmers across West Africa—realizes that
the future of meeting the globe's skyrocketing food needs lies in
cooperation and a new model of agriculture. "As more and more companies
figure out that this is the new capitalism," says Barry, "they'll make
the private sector exceedingly well-positioned to make a difference."
But until those forward-thinking multinational giants are the rule
rather than the exception, agriculture will need designs like Kola
Masha's—ideas that help Ibrahim Mustapha feed his family of six and
along the way, potentially pioneer a way to help feed millions.
Post Credits
Post Author: Francis Storrs
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