Kenyan farmers learn the power of long-term planning

Investing in greenhouses and premium seeds

How do you convince Kenyan farmers that investing in higher-quality seeds and organic pesticides boosts yields, resulting in higher income? The answer: by helping them to experience it firsthand.

Of the ten fastest growing economies in the world, six are in Africa. Against this backdrop, international companies are finding opportunities to enter the African market and contribute at a local level to issues such as sustainability and food security. In 2016, two Netherlands-based companies teamed up with Dutch development organization SNV to instruct Kenyan farmers on how to grow vegetables. The farmers received training and demonstrations in twelve locations.

“Our seeds are higher-priced than those that Kenyan farmers are accustomed to using,” says Heleen Bos, a project manager at seed production company Rijk Zwaan. “That’s why we consider demonstrations and training essential. Telling people your seeds are superior is one thing; you need to actually be able to back up your claim as well.

“We do this by sowing two fields: one with our own seeds and one with the seeds currently used by the farmers. That way, they see that our seeds not only improve yield, but also that some plants start sprouting earlier. It means you can take your products to market before your competitors.”

Organic pest control

Koppert Biological Systems teaches farmers about organic pesticides, including the use of insects and micro-organisms to fight disease and fungi. Kenyan farmers have little experience with using organic solutions to solve agricultural problems, and this method is also costlier than purchasing chemical pesticides.

Ed Moerman, Executive Manager at Koppert Foundation: “We’re teaching farmers to look not only at current expenses, but also at income and expenses generated by the growing process as a whole.

“For example, there’s a species of moth called Tuta absoluta, which is a tomato crop pest. If you use chemical pesticides to control this moth your plants will end up suffering from all the applications of these chemicals – to the point where they will lose their fertility sooner. Organic pesticides are more effective while also keeping your plants in better condition, leading to increased output.”

Missing elements

During an evaluation of their project, Koppert and Rijk Zwaan found that two essential components were lacking: finance and a sales market.

Bos: “An irrigation system costs €500 and a greenhouse, depending on its size, will set you back several thousand euros as well. That’s out of reach for most Kenyan farmers, when in fact it’s a good investment that is sure to pay off. It turned out to be quite tricky to find a local bank that was willing to provide loans to farmers. Banks have limited experience with horticulture and tend to zoom in on the risks involved: lack of rainfall, excessive rainfall, disease, and so on. They are not really aware of any successful examples.”

”Kenya has all the key ingredients for flourishing agriculture”

- Madelon Pfeiffer, Rabo Foundation

Investing

This is how Rabo Foundation, Rabobank’s social fund that helps to improve farmers’ living standards, came into play. Madelon Pfeiffer, the Foundation’s Program Manager for Africa, explains: “By providing farmers with loans and combining this with training, we teach coffee farmers, for example, the most efficient method for processing coffee and how to gain access to the market.”

Backed by its new financial partner, the project entered a new stage in 2017 under the name Seed2Feed Kenya. Pfeiffer: “The intention is for local banks to start providing loans, but there are still some hurdles to overcome at this point. They feel the risk involved is too substantial and therefore charge high interest rates – too high for farmers who need money to invest in seeds and pesticides. Without those funds, they have no access to high-quality seeds and won’t be able to grow choice tomatoes.”

She continues: “Farmers would also do well to invest in a rainwater harvesting infrastructure and irrigation system. On paper, Kenya has all the key ingredients required to develop a flourishing agricultural industry, but there is always a risk of crop failure due to drought. Farmers should harvest water during periods of rainfall, which they can then use to sustain them during dry spells.”

Finance

Pfeiffer: “Although we have an office in Kenya that helps farmers raise funds from local providers, so far we have been borrowing the funds ourselves from farming cooperatives or microfinance organizations. Farmers also have the option to apply for loans using their Agri-wallets.”

The Agri-wallet app provides farmers – many of whom have never even held a bank account – with access to financial services on their cell phones, allowing them to save money and take out loans from a third party financed by Rabo Foundation.

Supermarkets and traders

The second key element that Koppert and Rijk Zwaan deemed essential for success was a market in which the farmers could sell their products. Once farmers start increasing their output thanks to superior seeds and pesticides, they must, of course, have a sales channel for their vegetables as well. Bos: ”It’s important to keep the supply chain from farmer to supermarket as lean as possible and keep the number of players to a minimum. Otherwise, farmers’ products need to be as low-priced as possible – only to still be sold in grocery stores at a hefty markup. That’s why we wanted to build efficient supply chains by having supermarkets and traders negotiate with farmers directly.”

“We help supermarkets and traders negotiate with farmers directly”

- Heleen Bos, Rijk Zwaan

Short-term thinking

Finding suitable partners turned out to be yet another challenge. Moerman: “We had to learn by trial and error. We would think we’d found a good fit, only for it to turn out to have been the wrong choice. There’s the fact, for example, that farmers don’t always keep to the commitments they make with their sales partners, as they are inclined to short-term thinking. If X offers a higher price than Y, they will sell their products to X. They don’t realize that continuity of sales is at least as important, even at slightly lower prices.”

“The firmest commitment we’ve been able to secure up to this point is a handshake agreement,” Bos says. “Farmers and supermarkets enter into verbal agreements with each other but are unwilling to put those terms in writing. They want to have the freedom to switch partners somewhere down the road if that happens to be more convenient. Fortunately, SNV has found several partners who are willing to enter into genuine commitments with each other. It’s a clear case of win-win: supermarkets are guaranteed the product supply they need and farmers are secure in the knowledge they will be able to sell their vegetables.”

“The idea is for local organizations to take over next year.”

- Heleen Bos

Transporting perishables

Another challenge faced by the project managers is transportation. Rabobank Foundation’s Pfeiffer explains: “We’re based as close to Nairobi as possible. We would like to scale up our operations but need to consider that vegetables are a perishable commodity. A farmer might be located 100 kilometers from Nairobi, but it could take him up to three hours to get there due to the poor quality of the roads.”

Koppert also acknowledges the challenge involved in the logistics of the project. “Insects, mites and fungi need to be transported in refrigerated trucks,” says Moerman. “We ship live products for our subsidiary by plane to Nairobi every week, where they are picked up by couriers who deliver them to large growers. It would be too expensive to provide the same service to smallholder farmers, so we developed three products based on fungi and bacteria ingredients especially for them. We transport these products in refrigerated trucks to a number of local agrovets (end-to-end supply stores for farmers), which sell agricultural supplies and other items. These stores are fitted with in-store refrigerated displays. Farmers can drop by on their mopeds to pick up their fungi from the store whenever they need them. If they use the fungi the same day, they can serve their purpose for a whole variety of crops.”

Moment of truth

The three-year project has just entered its final year. Bos outlines the project’s vision for the future: “The idea is for local organizations to take over next year, without the need for us to remain involved from the Netherlands.”

Koppert’s Moerman adds, “We’ve learned not to micromanage the farmers but encourage them instead to work off their own steam. If we organize everything it actually becomes counterproductive, as they will show less initiative. We have therefore decided to enlist local partners, who will be in charge of both the project itself and its execution.”

”If we organize everything it actually becomes counterproductive”

- Ed Moerman, Koppert Foundation

Greenhouses

The project managers hope that the farmers and their customers will start working together more efficiently. They would also like to see more farmers invest in greenhouses. “Many farmers simply produce without considering whether there’s a market for their products,” says Pfeiffer. “This means they sometimes end up with a surplus of tomatoes, which then go unused, leading to food waste.”

She continues: “By using greenhouses to grow their products and signing contracts with buyers, farmers can more successfully tailor their production to the needs of their market. We can show them how much they will eventually make by investing in a greenhouse. Using greenhouses rather than open land to grow your tomatoes improves the quality of your crops. It also means you can produce tomatoes year-round and boost your sales.”

What’s next?

Because so many smallholder farmers are involved in the project, it’s a challenge for the organizers to provide them all with individual support. “That’s why we have partnered with a number of groups in which farmers can share knowledge and experiences and learn from each other,” Moerman explains. “We intend to make contact with more of these groups this year, so we will have enough critical mass to see if building a supply chain with high-quality products can be successful.”

Bos adds: “Although I don’t imagine we will have met all of our targets by the end of this year, our expectations are high. Sales of our seeds are steadily increasing. We know that in developing countries such as Kenya, we need to invest more time and financial resources to train farmers and develop the sector.”

“Koppert and Rijk Zwaan will be able to present a business case over time,” predicts Pfeiffer. “However, Rabobank is not quite at that stage yet. We hope that once we’ve managed to demonstrate that lending money to farmers can be profitable, local banks will come through and start providing loans at reasonable rates.”