June 26, 2014

Commentary - How to Make an Entrepreneur


By Emily Alpert, deputy director of Agriculture for Impact, an independent advocacy initiative that acts as the convener for the Montpellier Panel.

You can’t make an entrepreneur. They cannot be bought, packaged, or sold. Entrepreneurial spirit is something you are born with, but to flourish as an entrepreneur, it takes more than just good genes. It takes skills, business management training, affordable finance, and a nurturing business environment.

If Africa is to produce enough food to feed its booming population, it must learn to support entrepreneurs in the rural food sector, and fast. The latest report from the Montpellier Panel which launched this week, sets out a number of recommendations on where donors, governments, and the private sector can invest to nurture a generation of agricultural entrepreneurs, creating not only a more food secure future for the continent, but also an abundance of jobs.

Establishing a small or medium enterprise is often very difficult, particularly in the rural and food related sectors. This isn’t about the number of days it takes to register a business or to acquire utilities such as electricity or running water. These factors certainly discourage people from starting formal businesses, and should be improved, but the most cited challenge for small and sometimes informal businesses is actually access to finance; the second, good skills. But how do you acquire them?

 



Getting Started

As an example of how agribusinesses can be improved, the report looks at AgroWays (U) Ltd, a grain warehousing system in Jinja, Uganda. Managing Director Herbert Kyeyamwa first started the business in 1995, with the intention of buying grain at the peak of harvest season, storing it, and then selling it in the off-season when prices are higher. Now, in 2014, AgroWays (U) Ltd offers transport, cleaning, drying, weighing, classing, and storage services to 134 farmer groups, with a total membership of 8,560 smallholder farmers. The business employs nearly 150 people between the senior staff, part-time staff on hand during peak harvest season, and agents that oversee the collection and transport of grain from village aggregation centers to the central warehouse.

Herbert is a shining example of an entrepreneur that has responded to market demand to create a company that generates employment and wealth within the agribusiness value-chain. This, however, did not happen without external technical assistance, training, and finance—key components for any business to thrive.

The Uganda Development Trust (UDET) provides business services to assist SMEs in order to improve their management, operations, prepare bankable business plans, and access credit. UDET started working with AgroWays (U) in 2009, where they found the warehouse to have insufficient storage capacity, inadequate grain cleaning machinery, poor recordkeeping practices, an erratic supply chain, and limited working capital. Together they produced a bankable business plan that was submitted to Stanbic Bank and USAID in 2011 which leveraged nearly a million dollars in trade finance, a loan to purchase a modern dryer, and $200,000 for constructing eight village aggregation stores throughout Uganda.

Growing Up

To grow up, enterprises need well-designed business plans and marketing strategies to ensure that there is a long-term demand for their goods and services. Continued technical assistance and business management training are central during this stage.

SESACO, a food-processing company, makes highly nutritious snacks, drinks, and spreads from grains and nuts. Some of SESACO’s snacks, “mummies” and “daddies,” are Ugandan favorites and are sold throughout the country. With a monthly turnover of UGX 100 million ($39,000) and nearly 100 employees, the majority of whom are women, SESACO is a medium-sized company by most accounts. Nevertheless, SESACO also benefited tremendously from the technical assistance to leverage finance and expand its business.

While SESACO has been effectively “up and running” since 1987, UDET’s audit in 2011 found that, in addition to inadequate working capital, SESACO did not have a streamlined supply chain for raw materials, its products were sold haphazardly in lieu of a functioning marketing and distribution strategy, management did not provide guides or manuals for staff, and the factory machinery was poorly organized resulting in wasted production time. After working through these challenges, SESACO received working capital from the US African Development Foundation to improve machinery, package materials with clear nutritional information, and partner with Makerere University’s Food Technology Department to work on product development.

Taking Root

Getting the elements for a thriving entrepreneurial environment is both smart and necessary. It's smart because Africa is urbanizing: as people move into larger cities and small towns, the demand for more nutritious and varied food is a ready-market for smallholder farmers and anyone willing to invest in the agribusiness food chain. It's necessary because Africa should not miss the chance to turn the challenges of food insecurity, malnutrition, poverty, and unemployment—especially for a rapidly growing population of young people—into an opportunity.

 

About

The Global Food and Agriculture Program aims to inform the development of US policy on global agricultural development and food security by raising awareness and providing resources, information, and policy analysis to the US Administration, Congress, and interested experts and organizations.

The Global Food and Agriculture Program is housed within the Chicago Council on Global Affairs, an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. The Council on Global Affairs convenes leading global voices and conducts independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

Support for the Global Food and Agriculture Program is generously provided by the Bill & Melinda Gates Foundation.

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