Accessing finance is a common challenge for African entrepreneurs, who may have few assets. Spotting niche market opportunities can be critical – and a bit of luck can also help. Here’s how one Ugandan coffee export cooperative found its success.
John Nuwagaba and his business partner Stanley Manirigaba began managing the Ankole Coffee Producers Cooperative Union (ACPCU) in Uganda in 2007. At that time, the two had access to company assets worth just $900. As ACPCU’s General Manager, Nuwagaba had to rely on less tangible resources, like trust, to build a successful business.
The power of trust
Gaining the trust of the member farmers, and developing their self-belief was essential. One of Nuwagaba’s first actions was to secure fair trade certification for all members. That increased their access to certain markets, but it was also critical for one of Nuwagaba’s personal motivations: to transform the lives of Ugandan farmers.
The next challenge was to source enough coffee to meet the single export order ACPCU had received. Even though ACPCU was not yet able to pay for it, Nuwagaba convinced the cooperatives to provide coffee. The farmers provided 30 tons of coffee – proof of their belief in Nuwagaba’s vision. Ultimately it took three months for ACPCU to receive payment, which was then passed on to the members. Their trust had been well-founded.
Finding a niche: organic robusta
In his research, Nuwagaba had observed that organic arabica coffee commanded a premium price, but that the market for organic robusta – a hardier species of coffee plant – was less developed. He saw an opportunity for ACPCU to move into that niche robusta market, and wrote a proposal to convert member farms to organic production. A chance introduction to the Rabobank Foundation resulted in a grant to partially fund that conversion.
“The grant from the Foundation was an unexpected boost for us,” Nuwagaba claims. “That seed capital shot us forward.”
Peter Veening, an Investment Manager from the Rabobank Rural Fund, points out that entrepreneurs sometimes just need a bit of luck. “It’s hard to define a blueprint for success,” Veening says. “Every story is different, but a chance meeting with the right people can make all the difference. At the same time you have to work hard so that things come your way. Strong management is another distinctive feature of ACPCU.”
While ACPCU was pursuing its organic certification, Nuwagaba had another chance meeting – this time with an organic coffee buyer at an industry conference. The buyer invited Nuwagaba to contact him when ACPCU achieved organic certification. That buyer bought the first container of certified organic coffee produced by ACPCU. Today, demand for the cooperative’s organic coffee almost exceeds its current capacity to produce it.
“A chance meeting with the right people can make the difference”- Peter Veening, Rabobank Rural Fund
ACPCU members with John Nuwagaba (right).
ACPCU’s sales gradually increased, with the fair trade premiums being distributed back to the cooperatives. Members voted to invest those premiums in social initiatives such as local schools and health clinics, but even more so back into the union and cooperatives themselves.
By 2010, ACPCU had developed sufficient capital and cash flow to secure a $200,000 loan from Rabobank Foundation. That loan financed the building of the cooperative’s factory and ensured timely payments to member farmers.
The organization that exported a single container of coffee provided by 3,500 members in ten cooperatives in 2008 shows no signs of slowing down. In 2016, ACPCU exported more than two hundred containers of organic-certified, fair trade coffee, sourced from more than 10,000 farmers in twenty cooperatives.
Agility, vision and trust have paid off. And a little bit of luck.