Entrepreneurship Zone: 22 January 2025 : Zambia: The journey of building a retail chain for farmers

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Entrepreneurship Zone: 22 January 2025 : Zambia: The journey of building a
retail chain for farmers

 


 

 


 <https://www.firstcapitalbank.co.zw/> 

 


 

 


 

 

 



Interview with Simon Bentley
MANAGING DIRECTOR, FARM DEPOT

Lives in: Zambia

  _____  

Zambia-based Farm Depot is a retail chain supplying a wide array of
agricultural products to small-scale farmers. In addition to the stores, the
company also offers financing for smallholders and a subscription-based
farming support service. Learn how Simon Bentley and his co-founder Nina
Gibson grew their modest pickup truck operation into a business with 26
branches.

The article covers the following topics:

Origins of the business

·         Shifting towards a platform model that connects smallholder
farmers with service providers and clients across the value chain.

·         Dealing with human resources challenges

·         Economic headwinds in Zambia

·         Market opportunities in the Democratic Republic of Congo


Farm Depot origins


Growing up on a tobacco farm in Zimbabwe, Simon Bentley always had a
passion for agriculture. “It’s in my blood,” he asserts. Yet, in 2005, faced
with political and economic instability in Zimbabwe, Bentley relocated north
to Zambia, attracted by the government’s open-door policy to agricultural
investments.

Initially, Bentley joined forces with other investors to start a banana
farming business but he left that venture after a few years.

In 2008, he began talks with Ross Breeders, a poultry hatchery business
that provided small-scale farmers in Zambia with day-old chicks, which the
farmers would then raise for egg production or as meat. Although Ross
Breeders had a robust distribution network in southern Zambia from its
Lusaka base, its presence was weaker in the Copperbelt region. Consequently,
Bentley and his co-founder Nina Gibson established a distribution business
to extend Ross Breeders’ presence into areas where the company was less
established.

Operating from a Toyota pickup truck and trailer, specially modified to
carry day-old chicks in boxes of 50 to 100, Bentley and his team traversed
the Copperbelt, scouting new customers and making deliveries to those it had
already signed up.


>From pickup truck to storefront


In 2009, after trading from his Toyota for a year, Bentley and Gibson
opened the first Farm Depot store in Kitwe, the second-largest city in
Zambia. The 150m2 outlet was located near a bus stop, benefitting from high
foot traffic.

The transition to a physical store introduced additional overhead costs. To
spread these over a greater range of items, Farm Depot broadened its
inventory to include veterinary products for chicken farmers, like vaccines.

Bentley then expanded his offerings to include a variety of products for
crop farmers, such as seeds, fertilisers, chemicals, as well as equipment.
He views crop farming – specifically maize, soya beans, and vegetable
cultivation – as a significant growth area for the company. Bentley notes
that the market for crop inputs had been distorted for years by a
government-subsidised programme, making this segment less attractive to Farm
Depot. However, he states that the current administration plans to revise
the Farmer Input Support Programme due to affordability issues, which will
create more opportunities for Farm Depot to serve crop farmers.

Farm Depot sells products from brands such as Pannar, SeedCo, Yara,
Syngenta and Bayer that are procured both from within Zambia and
internationally.


Navigating growth


Farm Depot has grown its store network to 26 outlets across four provinces
in Zambia. This expansion has not only made Farm Depot more appealing to
suppliers but also enhanced its buying power.

To make its products more affordable, Farm Depot introduced the Panono
Panono payment plan. This concept allows customers to make a 10% deposit on
day-old-chick or feed orders. They then have four weeks to pay the balance,
interest-free. Upon completing the payment, customers can collect their
orders. This arrangement enables customers to secure products at a fixed
amount, safeguarding them from price fluctuations, and also helps them to
manage their cash flow.

Bentley notes that the company has seen an average annual growth of 20%
since inception, although this hasn’t always been linear. Typically, a store
generates about US$30,000 in monthly turnover, with a gross profit margin of
12% and a net margin of 2%. The company’s annual revenue ranges between
US$10-15 million.


Pivot to platform


Farm Depot’s next growth phase involves transforming into a ‘platform’ that
connects smallholder farmers with service providers and clients across the
value chain. Bentley has identified business opportunities in tackling the
four main challenges confronting farmers in Zambia: access to finance,
knowledge, quality agricultural inputs, and markets.

Expanding access to quality inputs

Farm Depot aims to create a digital marketplace enabling other agricultural
input dealers to list their products. “The idea would be to introduce other
agri dealers onto the platform so that we can scale, because right now it’s
dependent on us opening retail stores,” Bentley explains.

Financing solutions

In early 2023, Farm Depot launched a service that connects the 115,000
registered farmers in its database to finance providers. As of now, Inde
Credit is the only financier, but the intention is to add a variety of
lenders. Bentley points out that there’s a significant finance gap of $1.5
billion between what Zambian smallholder farmers require and what is
available to them.

Farm Depot shares the purchase history of its customers with Inde Credit,
which Inde Credit then uses to determine which farmers to finance. By
December 2023, Inde Credit had issued 450 loans with a total value of
$500,000 via the platform. The loans offered are collateral-free, and
according to Bentley, the default rate is below 5%.

Farm Depot earns a commission on each loan extended. A potential future
business opportunity is to also offer insurance to the farmers.

Access to knowledge

According to Bentley, the average maize yield for small-scale farmers in
Zambia is just over one tonne per hectare, in stark contrast to the eight
tonnes achieved by commercial farmers. This gap exists even though
smallholder maize farmers have receive subsidies from the government for
inputs, indicating a lack of farming expertise among them.

To address this knowledge deficit among poultry farmers, Farm Depot
introduced the Broiler Assist Programme. For a monthly subscription of $22,
farmers are visited weekly by extension officers who advise on optimal
chicken rearing practices. While the service currently caters exclusively to
chicken farmers, Bentley plans to extend it to crop farmers as well.

Facilitating market connections

The final piece of the puzzle is helping farmers sell their produce.
Recognising the difficulty many face in finding buyers, Farm Depot is set to
launch a platform facilitating direct connections between farmers and
potential customers, streamlining the path from farm to market.


Minimal external investment


Farm Depot has demonstrated that starting a business doesn’t always require
a substantial upfront investment. It was launched with a US$50,000 loan from
friends and family. In its early days, Ross Breeders also provided the
company with stock on credit, allowing iy to sell the day-old-chicks before
needing to pay for them. “Any profits that we made were invested back into
the business in order to … either purchase more products or … open new
stores,” Bentley explains.

The company’s initial institutional investment of €235,000 came from the
Enterprise Zambia Challenge Fund.


Human resources challenges


Finding the right staff continues to be a significant challenge for Farm
Depot, Bentley notes. The company has over 100 full-time employees. His
current strategy focuses heavily on conducting thorough interviews to ensure
the right candidates are hired from the start and to fire swiftly if someone
is not the right fit.

Bentley mentions that education levels in Zambia are generally low,
prompting Farm Depot to implement its own training programmes, despite the
risk of investing in employees who may not stay long-term.

Moreover, Bentley emphasises the importance of hiring individuals who are
committed to supporting small-scale farmers in Zambia. “One of the
fundamentals is that the people we employ have to care about transforming
our customers from being small-scale farmers into emerging or commercial
operations,” Bentley says.


Doing business in Zambia


Zambia has faced several economic challenges in recent years, notably
grappling with a significant debt burden. In November 2020, it became the
first African country to default on its debt during the Covid-19 pandemic.
Zambia’s total debt was estimated at $32.8 billion at the end of 2022.

Bentley points out that exchange rate volatility ranks among his toughest
challenges. The Zambian kwacha has depreciated more than 300% against the US
dollar over the last decade. This has been problematic for Farm Depot, as
some of its products, like fertiliser, are priced in US dollars but sold in
kwacha.

Bentley believes the country relies too heavily on copper mining and
suggests that more emphasis on agriculture could benefit the economy.

Despite these macroeconomic challenges, he mentions that Zambia is
generally stable politically outside of election times, which aids in
long-term planning.


DRC opportunity


Bentley highlights a significant market opportunity in the Democratic
Republic of the Congo (DRC), Zambia’s northern neighbour. He mentions that
exporting to the DRC offsets some of Zambia’s currency-related challenges
since the DRC is a dollarised market.

He observes that the DRC produces very few products domestically, leading
to a high reliance on imports. Farm Depot has strategically located stores
near the Zambia-DRC border, attracting Congolese customers who cross the
border to make purchases.

While Bentley is open to the idea of establishing stores within the DRC, he
says that the entry costs are substantial, necessitating significant
financial resources.

*         —Howwemadeitinafrica

 

 


 


 


 

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