Entrepreneurship Zone: 04 September 2023 :: Profiting from Rwanda’s avocado and chilli export potential

Mon Sep 4 09:37:52 CAT 2023

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Entrepreneurship Zone:  04 September 2023 ::  Profiting from Rwanda’s avocado and chilli export potential

Entrepreneur Seun Rasheed, founder and CEO of SOUK Farms, is tapping into Rwanda’s strengths for cultivating and exporting crops such as avocados, chillis and beans.

In 2005, Rwanda’s exports from its horticultural sector – which includes fruits, flowers, and vegetables – totalled US$5 million. By 2018, this figure had climbed to $25 million. By 2022, it more than doubled, reaching $53.9 million.

Rwanda possesses a climate favourable for horticulture, fertile soil, and has benefited from an abundant labour force. In fact, the country has so much faith in its strategy to tap into a rapidly growing global horticulture market, that, next year, it aims to achieve export revenues of as high as $130 million.

This growth trajectory finds a parallel in the journey of SOUK Farms, a horticulture company established by Seun Rasheed in 2019. In September of that year, the business exported its first batch of avocados, both Hass and Fuerte varieties. Since then, it has broadened its offerings, adding chillies, fine beans, and a variety of other fruits and vegetables.

SOUK Farms celebrates its fourth birthday this year, but up until 2021, Rasheed was still employed as lead economist for Shell at one of its liquefied natural gas sites in Qatar.

“It (the company) was meant to be set up as a side business while I kept my own job, but very quickly it grew into something that needed me to be there full-time,” he explains.

Rwanda’s allure

Rasheed hails from a farming family in Nigeria but moved to the UK in his early teens. His parents maintain agricultural business interests in Nigeria. The inspiration to start SOUK Farms in Rwanda came during a holiday in April 2019, which unexpectedly turned into a business feasibility study.

“I fell in love with the country… it’s a very easy country to do business in. It took us six hours to register the company… and by the next day we had our bank account open,” says Rasheed.

He emphasises Rwanda’s reputation as one of the cleanest countries in Africa. Additionally, its business-friendly ranking (38th globally by the World Bank, and second in Africa), comprehensive 4G coverage, and robust infrastructure made it an attractive destination for his venture.

“In terms of the climate, it is perfect for horticulture crops,” Rasheed notes. “With the right irrigation installation, you can farm… and supply your customers with produce all through the year.”

Recognising the industry’s profit potential

Rasheed quickly saw the potential for a profitable venture when he compared the prices of horticultural crops in Rwanda to those in the UK.

“The difference in price was quite stark,” he says. In Rwanda, certain items were priced at $1-$3 per kilogram, while they would cost between $6-10 in the UK.

Between April and September 2019, he took several trips to Rwanda to conduct market research, familiarise himself with horticulture practices in the country, and to identify local smallholder farmers that the company could engage as ‘out-growers’ – farmers who could cultivate the crops and supply SOUK Farms.

Utilising his connections in the UK and the Netherlands, where he had also lived for two years, Rasheed managed to secure three clients, paving the way for the first shipment of avocados.

Seun Rasheed, founder and CEO of SOUK Farms

SOUK Farms cultivates and exports a diverse range of horticultural products. Leading its export volumes are the Hass and Fuerte avocados, and Rasheed sees a significant growth potential in this segment. Following closely are various chilli varieties and fine beans.

Rasheed notes that Rwanda’s avocado season starts just when major African producers like Kenya and South Africa finish their international shipments, usually by September or October. Similarly, when other suppliers run short of chillies, Rwanda’s supply becomes available.

According to a report from Manufacturing Africa, the farmgate price for chillies in Rwanda is $425 per tonne, with a wholesale price of $4,360. “Those numbers are slightly exaggerated,” says Rasheed. “I’d say around $500 for farmgate price and then the wholesale price can be anywhere between $2,500 and $3,500.”

He also points out various hidden expenses in getting products from the farm to clients. For example, air freight, which costs between $1,500 and $2,500 per tonne, impacts margins.

Rasheed isn’t the only one concerned about the air freight costs. Recent reports show many exporters are struggling with these rates, currently at around $1.8 per kilogram, especially since they haven’t decreased much after spiking during the Covid-19 pandemic.

Balancing direct farming with out-grower collaboration

Initially, SOUK Farms solely partnered with out-growers. But the challenge of ensuring consistent volume and quality from these farmers led the company to start its own farm operations, leasing land directly from smallholder farmers. These farmers were invited to be active in and learn from the cultivation process, offering them a potential future as contracted out-growers.

Currently, the company manages 130 hectares of its own farms, while approximately 1,200 out-growers contribute crops from an additional 70 hectares.

SOUK Farms supports its contracted out-growers with essential agricultural inputs – such as seeds, fertiisers, fungicides – and agronomy guidance. The agronomist’s role is particularly crucial, given the company’s need to persuade farmers who previously cultivated subsistence crops like maize or beans to transition to planting avocado trees and cultivating new horticultural cash crops like beans and chillies.

By offering these agricultural inputs at no cost and ensuring a purchase agreement for the harvest, SOUK Farms removes the necessity for these farmers to seek costly loans. “These crops are capital intensive, so we remove that aspect. That means that there is limited risk for the smallholder farmer,” says Rasheed.

For out-growers and smallholders, this arrangement offers clear business advantages.

Rasheed highlights that they can potentially earn up to 350% more in terms of revenue compared to traditional grain farming.

“A farmer growing maize could get between three and five tonnes of crops from a one-hectare piece of land and probably do that two to three times a year with limited crop rotation. A farmer growing chillies on the same hectare of land, within an eight-month period, would get anything between 18 and 22 tonnes of chillies; a four to five times increase in yield. In addition, chillies will typically sell for anywhere between 40% and 60% more than maize.”

The regional opportunity

At the moment SOUK Farms counts European entities such as TSA International, an importer and exporter of fruits and vegetables, and McGarlet, an Italian horticultural importer, as clients. It also works directly with a few supermarkets in the Middle East.

However, Rasheed is bullish about the opportunity for intra-African trade; he believes that this is where the real growth potential lies. “Rwanda is quickly becoming a cargo hub in Africa. RwandAir flies to about 20 countries in the region and all the major hubs in Europe and the Middle East.”

The challenge for regional trade, he argues, is not transport and logistics, but consumer perception of quality out of Africa and disrupting established trade relations that have been in place for decades between African and European trade partners.

He is hoping this will change, counting on the government’s support and focus on agriculture as part of its Vision 2050, to get regional trade over the line. “I don’t think, I know, Rwanda will be a major player in horticulture in the coming years … maybe within five years,” says Rasheed. “Horticulture is a huge focus area for the government and our business is perfectly aligned with this agenda.” -Howwemadeitinafrica

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