Entrepreneurship Zone: 23 October 2021 :: How this Dutch entrepreneur built an organic agribusiness company in East Africa

Sat Oct 23 08:23:16 CAT 2021

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Entrepreneurship Zone: 23 October 2021 ::  How this Dutch entrepreneur built an organic agribusiness company in East Africa

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

Agribusiness company Shares Uganda specialises in the export of three commodities from Uganda to Europe: chia seeds, sesame seeds and dried bird’s eye chilli peppers. How we made it in Africa spoke to Marck van Esch, founder and CEO, about the strategic steps taken to grow the business and the challenges faced along the way.

Establishing a business in Uganda

Van Esch decided he wanted to build a career in agriculture when he was backpacking through Africa after finishing high school in his home country, the Netherlands. Working on a mission post in Kisumu, Kenya, his interest was piqued. He returned home, studying in the evenings to get the required subject passes to enrol for a tropical agriculture programme at university. He has been involved in organic agriculture since graduating in 1987.

In the late ‘80s and early ‘90s, Van Esch set up projects to cultivate organic cotton in various regions – India, Turkey and South America – processing the cotton for his company’s textile line. “Around that time, I came in contact with a group of people who wanted to start organic cotton farming in Uganda with the help of Swedish donor money,” he says.

The Lango cotton project partnered with Van Esch, who already had the buyers, to secure a market for the cotton. “When you work with organic cotton, you also have to look at rotation crops as part of the organic farming system and that is when we decided to include sesame in Uganda,” he says. “However, to scale sesame cultivation and control the quality, you need to establish a processing factory for high purity seed cleaning (natural fumigation). We therefore worked towards getting that in place and in 2002, a factory was commissioned that could process and clean any seed or grain at high purity, up to 99.95%.”

The factory, 20km outside of Kampala, includes a natural fumigation system ideal for organic processing.

Developing the supply

Shares Uganda has always, and will continue to, source from small-scale farmers. The company provides training to the farmers through qualified field officers. Through a contract with the farmers, it guarantees the purchase of all cash crops.

The company no longer focuses on cotton, with strong existing competition in that market making the venture unsustainable in the long term. It now procures sesame seeds, bird’s eye chilli peppers and chia seeds from its contracted farmers. Van Esch explains that the company has built good relationships over time in Uganda, which helps with finding the farmers to supply to Shares Uganda.

When Shares Uganda wants to establish itself in a region, it first investigates whether it can find producers who are already farming organically. It also checks to see if the potential contract farmers are in line with what is required from organic certification in terms of pesticide use.

“Then we reach out to local leaders at all levels and introduce the programme, even running radio ads. Sometimes we start with demo fields first. You have to show farmers this would be an attractive business for them.”

Sometimes having a contract with a farmer still does not guarantee supply, admits Van Esch. “At the end of the season, if there is another party that offers a higher price than the one we agreed prior to the season, they could sell to the highest bidder. We try to combat that by making sure our position in the area and community is strong.”

Why sesame, chia and chilli?

Van Esch says sesame was a clear decision as it was already grown by the smallholder farmers.

The bird’s eye chilli peppers, on the other hand, work well because it is easy to intercrop with other plants such as beans. “By the time your perennial chilli bush is grown, you could have already had two harvests of beans. You can also plant chilli in a ring around your field as a repellent for pests, or soak cut chillies in water and use as a natural pesticide against soft body insects,” adds Van Esch. “These are the things we teach our farmers.”

Chia is currently bringing in a lot of money for the farmers. South America, the main producer of the crop, has had a very bad season. This means many buyers are looking for alternative suppliers. “We suddenly have requests from all over the world. How long this will last, we do not know, but farmers can benefit from this the next season.”

As it is a short-cycle crop, the farmers can quickly respond to market demand and cash in on the higher prices.

Shares Uganda’s processing facility outside the capital Kampala.

Organic potential vs malaria safety

To protect its organic certification, Shares Uganda has had to move its hub of farming activity twice since its inception. Each time it was because of the government’s indoor residual spraying (IRS) programme aimed at eradicating the prevalence of malaria in the country.

“The Ugandan government used dichlorodiphenyltrichloroethane (DDT) to spray the walls of the huts where people live,” says Van Esch. “If you spray DDT inside those huts, where our farmers were also storing their crops, you could get cross-contamination that could result in the loss of our organic certification.”

In 2008, Shares Uganda had to abandon its original site and all the small-scale farmers established there as a consequence of the spraying programme, and move to another district in the north of Uganda to rebuild. (The company has since re-engaged the original farmers to supply it with conventional, non-organic crops.)

But it wasn’t long before the Ugandan government brought the IRS programme to Shares Uganda’s new organic base and it had to move once again, this time to the West Nile sub-region in north-western Uganda.

“Unfortunately, there is a new IRS programme in the West Nile area. It has been postponed owing to Covid-19, but it will happen eventually. We are just continuing and hope to still buy the next harvest in December. You can clearly see how challenging it is to establish a certified organic programme here. Uganda has a major opportunity when it comes to organic production and the organic market, but because it is not taken seriously and not protected, the whole of Uganda and all the many small-scale farmers miss out on this opportunity.”

Hedging against the risk – enter the conventional market

To remain sustainable and keep growing, Shares Uganda had to shift from being entirely dependent on certified organic commodities and step into the conventional (non-organic) agricultural commodity market.

With this market in mind, it continues to source all three crops from the regions where it no longer can guarantee the organic integrity of the supply chain owing to the IRS programme. “When we first went conventional, it wasn’t a joy for me. But over time, I saw the opportunity to spread the risk.”

The farmers won’t necessarily get the premium price that is available for certified organic, but with the company acting as a guaranteed buyer, the arrangement remains beneficial to the farmers.

Finding global buyers

Van Esch ascribes the company’s success in securing buyers to his experience in trading certified commodities over the past three decades. “We have never had any trouble finding clients. I think it’s a combination of knowing the market and having built up a good track record. It is always important to make sure you can supply a commodity to your clients that they really need and that fulfils all the requirements,” he says.

Shares Uganda is FSSC 22000 certified, one of the highest food safety standards available. “We have also been fair trade certified for a long time. We invite our clients to Uganda so we can show them what we are doing, which is more important than just having the certification.”

Building a successful value chain

For anyone interested in setting up an agricultural commodities business, Van Esch has some advice.

“You have to establish if there is a demand in the market and the required standards for the raw commodity. Then create reliable supply from the farmers themselves, instead of buying from agents where you don’t have control over what is happening on the ground.

“Quality control and checks at all different levels are also crucial,” he says.

Thirdly, Van Esch emphasises the importance of having a processing system in place that can ensure consistent quality.

“You don’t want to expose yourself to a bad surprise and lose a client. It’s like everything; a method of learning by doing. Every commodity has its specific challenges you have to understand to ensure delivery of good quality.”-Howwemadeitinafrica

Shares Uganda buys chia, sesame and bird’s eye chilli from smallholder farmers.

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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