Global business principles – local nuances

Somebody said a Chinese student who goes to study business in the West will return home and do business the Chinese way. An Indian student will do the same. It is not yet clear whether an African business student will also come back home and conduct business the African way. While business principles may remain the same across the globe, local nuances are increasingly determining the difference between growth and stagnation, success and failure.

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Responding to opportunities through social capital

If it is true that Chinese, Indians and other races are good at tapping into their values and social capital in responding to business opportunities, Africans have a lot of work to do in that direction. When an African business man dies, his belongings, including businesses assets are shared between his children and surviving spouses. If he was a farmer with several wives, his farm will be divided among the surviving spouses and children. One son takes a tractor, the other a disk harrow, the other a truck, the other a grinding mill. The other child or wife may inherit a fruit tree plantation while another gets a processing plant. This means a business that used to operate as single unit becomes fragmented into pieces that no longer cohere. On the contrary when a Jewish or Indian business man dies, customers do not even see any change.  Everything continues to operate as before and the customer base is extended to the next generation.

Globalizing local food systems

Although they may be immersed in the same business curriculum, the way children from different background respond to business opportunities is influenced by their social capital. In a rapidly globalizing and competitive world, culture and social capital are becoming a fundamental base for niche markets. People who know about a unique food system tied to their culture are the ones who can promote it among other cultures. When an African takes his/her food system to England, Australia or USA, s/he becomes an ambassador for the food system from his/her community back home. That can be the genesis of a new food business. A lot of nutritious food in developing communities remain marginalized because people from these communities who have gone to cities and overseas are not doing anything to globalize their culture through their food system. Nigerians are in the forefront of taking their food system wherever they go. Other Africans are fond of despising their food and embracing foreign food like Chinese food which is rapidly displacing African food in many African cities. Eating at a Chinese restaurant is considered more prestigious than eating at an African restaurant.

Cultivating a unique customer base

Instead of being abused through partisan politics, the notion of clans and tribes can be a powerful tool in advancing culturally-rooted agribusinesses to other parts of the globe. If the Italian pizza has been globalized, why not the Ethiopian Njera, famous Ndebele food known as Mxhanxa or other delicacies from other African cultures. When tourists visit Africa, they do not want to eat what they already eat at home but taste unique African food. Africans cannot continue blaming modernization for fragmenting their communities when some cultures are turning modernization and globalization to their favor. Nothing prevents African youths who leave rural communities for the city or foreign countries to return home and explore unique business opportunities. Many clans and polygamous networks are so strong as to constitute a big market for business ventures. An aspiring business person should count his/her own clansmen and relatives as the first customer base.  Luckily, African informal markets are showing some of the possibilities in transforming social capital into resilient business outcomes through trust and relationships.

New roles for African chambers of commerce

African chambers of commerce tend to be concentrated in capital cities with no extension to rural areas and cultures that should be a source of distinctiveness for different members. Foreign Direct Investment, knowledge and other forms of capital will not take African businesses far without curiosity and social capital, which are becoming more sources of value. Knowledge is power but curiosity pulls the trigger. Most African chambers of commerce continue to pay lip service to knowledge and evidence gathering. Chambers of commerce should articulate the capacity of their industrial entities and their raw material expectations that have to be matched with production. It is through evidence that the capacity of an entire sector like the milling industry can be known.

In several African countries, the Small and Medium Enterprises (SME) sector has emerged as a strong competitor for the big milling industry. It means chambers of commerce representing the big industry have to accurately assess and understand the SME sector as a serious competitor. For instance, in the maize milling or peanut processing business, there are now many people operating grinding mills and peanut butter processing mills in both urban high density areas and rural communities, posing direct competition to big traditional millers who used to dominate the food processing sector.  If more than 60% of the milling market share has gone to small SME actors, who are big millers milling for? Gathering evidence will guide big millers to change their business models unlike pretending they still command a big market share when in fact it has been eroded by small players.

Evidence will also demonstrate the extent to which consumers are moving from tinned beans and tinned fish to pre-cooked beans and dried fish. The expansion of SME actors into rural business centres also mean raw materials that used to flow to big millers in cities are now being intercepted by small SMEs at growth points and rural business centres whose advantages include proximity to production areas and flexibility in handling smaller quantities.  For example, groundnuts are being intercepted by small peanut butter producers at rural business centres. Rural electrification initiatives are exacerbating this trend.

Going beyond buying raw materials from farmers

Farmers are now beginning to ask what other additional services or benefits are being offered by big companies. They are seeking relationships that go beyond buying raw commodities from farmers. That means big companies should innovate by coming across as guarantors to famers so that they can access inputs and finance. Gone are the days when big companies would just wait to buy when the farmer had produced alone using self-financing and grappling with many challenges.  Big companies cannot continue to be price setters for cattle and other commodities whose production they will not have supported. That is why farmers end up preferring open markets where the laws of demand and supply prevail.

Are big companies offering knowledge and information?  In a dynamic economy characterized by climate change and other negatives, farmers are no longer interested in future contracts. Where contract farming is happening, why do contractors look for the best farmers who already have access to resources? Should they not be looking for under-resourced farmers as a way of broadening the supply base? By supporting the well up, big companies widen the gap between the rich and the poor who end up continuing to be laborers when they need a graduation pathway that can see them growing out of poverty. When potential players are excluded due to lack of resources, production for industries suffers and narrows.

The power of a knowledge agenda

Harnessing social capital means developing countries have to broaden their knowledge agenda beyond formal education. Each community has knowledgeable people who have nothing to do with formal education like high schools, colleges and universities. These people know how to fix things and produce resilient products although they are not factory managers or university deans. Gathering intelligence through a broader and deeper knowledge agenda can inform other actors like banks as to how they can become key actors in socio-economic growth. Questions like what informs the horticulture finance facility and where should financing value addition start can be answered through a knowledge agenda.

A focused knowledge agenda will also lay the foundation in rebuilding value chains within a wider agricultural ecosystem. Processing requires value chains not ecosystems. It requires organized production, logistics and marketing. Processing cannot work with ad hoc supplies without clear actors.  A knowledge agenda will address questions like: Who is in the soya bean value chain? Who manages supplies? Who is responsible for aggregation?  Addressing bottlenecks requires high levels of organization. Emphasizing price like $780/ton of soya bean invites opportunistic aggregators who masquerade as farmers by going to buy from scattered farmers. Government and financiers will think they are giving a good price to farmers when money is going to opportunists.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

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Cultivating the power of real-time awareness

As agricultural value chains in developing countries become over-crowded and hyper-competitive, real-time awareness has never been so important. While digital technology is being presented as a solution,  more efforts have to go into ensuring information satisfies the needs of farmers, traders and other value chain actors who want to engage in evidence-informed decision making. Many organizations that currently produce manuals for farmers do not realize that some farmers have no time to read such manuals from cover to cover but can only consult the publication when a need arises.

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There is a difference between availing information to agricultural value chain actors and making it user-friendly in ways that increase real-time awareness. Most digital initiatives that focus on disseminating information to farmers do not spend enough time figuring out if such information is user-friendly or contributes to real-time awareness. As a result, there is information over-load, especially for particular commodities. For instance, while commodities like maize, cocoa, cotton, tomatoes and banana can be characterized by information over-load, information scarcity is a permanent feature of orphaned crops and livestock. There is more information about cattle production than rabbit farming, for example.  In the absence of smart content developers, digital technology might increase the gap between famous commodities and orphaned ones.

Building new ways of handling evidence

Value chain actors have to be capacitated in analyzing existing data in new ways. As they set and tackle priorities in competitive ecosystems, it is critical to start from existing data or evidence. Every community has its own community software in the form of reliable practices and what has stopped working.  While such knowledge may not have been codified, community members might want to consider what they already know about particular markets and different consumers. Formalizing these ideas and turning them into opportunities can be a good entry point.

Many African farming communities already have a wealthy of information that just needs creative application. They may even advice formal institutions like government departments to search for new insights from unexpected places unlike over-depending on traditional surveys like annual crop and livestock assessments. Formal institutions may also be pointed to new sources of evidence like different types of markets such as spot markets, road side markets, formal markets, institutional buyers and others. This will increase appreciation of the full range of factors affecting consumers’ experiences.

Exposing farmers to new sources of evidence

In most cases, traders interact more directly with consumers while many farmers do not have that chance but rely on secondary sources of feedback. There are also many cases where farmers are fed commercial data sets like advertisements from seed companies or input distributors whose information may be biased towards selling inputs irrespective of effectiveness. The real value for farmers may not be in messages from companies that are selling inputs but combining such messages with local knowledge and advice from independent knowledge brokers like government extension.  Where farmers do not have access to feedback from satisfied or unsatisfied customers, they will continue doing things the wrong way and fail to retain customers. Like all other value chain actors, when farmers tap into effective customer feedback, they will be able to improve relationships with diverse consumers and expand their market share.

Identifying the right value chains

Real-time awareness makes it possible for new farmers and investors to accurately identify value chains in which they can invest profitably. For some commodities, price elasticity can be so high that a fall in price suddenly leads to huge losses. Evidence can show how some value chains can be disqualified by both internal and external factors. On the other hand, commodities like tomatoes may continue to be produced in one area because a lot of knowledge has been generated and applied in the same community for generations such that almost everyone now knows how to produce tomatoes without need for extension support. Some commodities like potatoes and banana can continue to be produced in a particular community because tastes and preferences have been honed and extended over time.

It is through real-time awareness that choices like producing a commodity where it does well in order to generate better returns on investment can be anchored. With the right support, one production corridor can become a market for other production corridors. For instance, the potato corridor can become a robust market for the livestock production corridor. Where some value chains for fruits like oranges and apples have already been developed, support might only be in the form of creating an enabling marketing environment. Through real-time awareness and evidence, agricultural decision makers can see how much is flowing to the market from a particular farming community, how much is left for local consumption and how much is lost through poor post-harvest handling practices. Since what normally comes to the market is the best, if poor quality commodities come to the market it might mean nothing is being left at local levels – signaling malnutrition in production areas.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Empowering communities to evaluate their knowledge

eMKambo is increasingly meeting rural communities that have been schooled into valuing tangible assets like dams and tractors at the expense of intangible assets like knowledge on how to earn more value from those assets. In agricultural communities where assets like irrigation schemes and roads have been built or rehabilitated, people are still unsure how they can unlock value from those assets in the absence of a market for commodities to be produced and transported to consumption zones.

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This is where the ability to evaluate existing knowledge or intangible assets becomes important. Every community has intangible assets in the form of expertise, experiences, ambitions, visions and appetite for risk. However, such intangible assets remain difficult to evaluate and cost. On the other hand, interventions from development actors continue to provide support in the form of tangible hardware as opposed to software issues like knowledge which can turn assets into better lives. Consequences of ignoring intangible assets are often visible in the form of under-utilized assets like dams, irrigation equipment, expensive processing equipment and roads.  If communities are empowered with formulae for assessing the value of their knowledge on using pastures and roads, they can be able to see how such  assets are saving a purpose. For instance, the value of a road can be assessed through high quality commodities that are transported to the market from the community.  Gathering such details means investing in data collection.

Informing commercial transformation

It is through consistent data collection and analysis that communities can inform their broader commercial transformation on the basis of available resources such as water, pastures, tourism potential and others. Through collecting data on what gets out and comes into the community, it is possible to see the value of a good road network or a water source. While some people may think this is a difficult process, many value chain actors in any community already have data and tools that can easily be integrated to provide a complete picture for the entire community.  However, unless there is consensus on what needs to be measured and understood, the purpose of collecting the data is lost. Community members have to agree and focus their data collection vision of what they want to achieve. This will be the foundation on which community data-driven muscles can be built. Eventually data will begin to influence community business and social outcomes in ways that align all actors doing the same thing. What is the point of investing in a well-furnished house when the household continues to suffer acute malnutrition?

It is time development agencies move away from providing hardware like infrastructure to supporting the germination and application of software like knowledge and the right attitudes. Government departments and local authorities have lots of data but such data is either outdated or inconsistent such that it is difficult to use. While some knowledge is in people’s heads, mechanisms of collecting it can be set up so that collection becomes a fluid process.  Providing a structured data collection method can ensure cleanliness of the data in ways that simplify usage.  Communities can identify people responsible for cleaning and ensuring consistency in the quality and availability of data. In addition to ensuring data is available when required, it is also important to determine different audiences for different sets of data. Decision makers may need different data from new comers into a community. Local business people like agro-dealers may be more interested in business metrics than general insights.

The power of forecasting and early warning

Capturing data at every information and decision-making node enables communities to see opportunities ahead of everyone else. There have been cases where outsiders see opportunities which local people do not see due to lack of a culture of collecting and analyzing data at local level. A transparent data collection system is a foundation for more reliable decision making and accurate forecasting. This will also assist farmers in gathering valuable insights on the behavior of different commodity buyers, instead of relying on intermediaries who often tilt business outcomes in their favor. Transparent pricing of diverse commodities can also be enabled through consistent flow of data about commodity volumes and prices in diverse markets.

 Getting the right data in the right place is the first step in building robust commercial capabilities for farmers and agribusiness that are struggling to break through. Better and more informed decisions can be arrived at when high quality and trackable data is available throughout the agricultural ecosystem. It is through reliable and consistent access to customer data that value chain actors can be able to see growth opportunities and accurately meet customer needs.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

How ecosystems are replacing value chains in African food systems

Instead on choosing a few value chains in which to specialize, some agribusinesses in developing countries are being compelled to embrace an ecosystems approach to agriculture.  This is because each commodity has its limits. Many contract farming models are collapsing as value chains evolve into ecosystems where different agricultural commodities either complement or substitute each other, thanks to ICTs and the knowledge economy. The definition of staple food is also becoming increasingly subjective, especially given that some households have more food choices and might consume less of what is traditionally considered their staple food.

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The influence of SMEs

In countries where the Small and Medium Enterprise (SME) sector is expanding at the expense of big corporates, value chains are rapidly giving way to ecosystems. For instance, rather than supplying food to one big company, food traders are forced to follow scattered SMEs whose demand volumes vary a lot. This phenomena is re-defining food supply models and ecosystems. Where a food trader used to supply tons of potatoes or sugar beans to one company, the consignment now has to be split into the needs of more than 20 different consumption zones who also need different other foods at once.

The knowledge economy is also challenging data collection methods like random sampling. Targeted sampling is becoming more ideal because champion farmers and traders have different knowledge needs from new farmers and traders. This means the classification of farmers should not just look at land and other resources but consider knowledge, skills and experience. Tools that are used to reveal poverty and vulnerability levels are different from those that explore commercial innovation and growth.

African food markets as ecosystems, not value chains

In addition to meeting the needs of diverse consumers, one of the critical roles of African informal food markets is consolidating commodities and knowledge from different sources and distributing to different demand zones. As commodities are demanded by traders, processors, consumers and other actors, the demand pattern is more of an ecosystem. Value chains are limited to cases where farmers are contracted by a company to supply specific commodities. Still in those situations, the temptation to turn relationships into an ecosystem continues, as exemplified by side-marketing and side-demand for knowledge.

These markets also support knowledge ecosystems between consumers, farmers, traders, transporters, processors and different actors. Very few commodities can currently be distributed directly from farm to factory without passing through other actors like aggregators whose role include grading and sorting volumes before distributing to different users. On the other hand, the cultural-rootedness of food is creating new markets and ecosystems.  The best people to market culturally-rooted food are those who grew up eating such food and know different ways of preparing it. The true commercial value of yams is not in areas where it is produced abundantly but in areas where it is not found.

Food ecosystems are fragmenting value chains such that tomatoes do not just travel straight from farm to factory due to competing uses which sometimes divert supply into different routes before commodities get to the processing stage.  Informal channels and relationships play a part in this distribution process.  That is why picking a few value chains from an ecosystem comprising more than 80 different commodities may not be informative. Most of these commodities either supplement or substitute each other.  A production corridor approach is more ideal because it shows commodities coming from different areas and how they either complement or substitute each other.

Paving a commercialization pathway

It is through careful characterization of consumers that effective commercialization pathways can be cultivated.  Subsistence consumers may not assist in pointing the commercial direction. Policy makers in developing countries have a duty to explore different incentives for farmers in order to avoid despondence and loss of confidence in the market. Many smallholder farmers are not willing to wait for the slow marketing process and random walks associated with different markets. When farmers become impatient, traders end up warehousing food on the market and wait for buyers when ideally such warehouses should be on the farm, so that traders get in touch with farmers in response to demand.

As part of promoting commercialization, farmers who do well should be incentivized the same way farmers who are not doing well end up receiving free inputs. Areas and districts which supply more commodities to the market should also be incentivized in ways that recognize their contribution to the Gross Domestic Product (GDP). However, incentives are difficult to frame when there is no culture of collecting data showing volumes of commodities coming from different production zones. When such data is available, it becomes easy to ensure proceeds from horticultural exports cascade to horticulture farmers so that they see their value of their work.  Such incentives are better offered at community level.

Unfortunately, at the moment most farmers stop where serious commercialization begins. Once farmers receive their meagre once-off payment, commodities move into private hands and government benefits through Value Added Tax, whose benefits do not cascade down directly to farmers. That is why some banana farmers wonder why they are given less income when they hear that their commodities produce various products like yoghurt, fruit juices and many different products. Diverse forms of incentives can address some of these genuine concerns.

Limitations of some conventional incentives

Field days and agricultural shows should desist from incentivizing one farmer without recognizing the entire community which encourages the winning farmer to work hard and provide the necessary competitive environment that allows him/her to win. In most cases, field days are stage-managed and turned into branded commercial events where input companies compete to sell their inputs. These events should focus more on knowledge sharing as opposed to advertising, in misleading ways. When government extension officers who are supposed to be neutral knowledge brokers are branded with t-shirts and hats from a seed company, their objectivity becomes questionable.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6