THE SOCIAL ENTERPRISE MODEL FOR AGRI BUSINESSES IN TANZANIA

Tanzania has the majority of the population employed in agriculture. The National Bureau of Statistics has the rural population involved in agriculture at thirty one million. This is a significant proportion of the population. It therefore goes without say that a social enterprise modeled business for agribusinesses such as bulk grain storage, cereals flour milling, rice processing, cotton ginning, agri-financing to mention a few need to sharpen their focus on this approach. The social enterprise model could be viewed as the other side of the coin of the “making markets work for the poor approach” M4P.The difference is the initiator. The business .The operation of the business conscientiously focuses on making social enterprise a key approach to structuring the supply chain and the business at large. It is important to define the term social enterprise. A definition that captures the meaning adequately states that a social enterprise uses commercial strategies to maximize the well being of the human and the environment rather than maximizing profits for external shareholders. A social enterprise can be for-profit and non profit. The context focused on will be for-profit. Some commercial enterprises have social objectives; however these are viewed as being necessary in order to attain financial viability. The difference with a social enterprise is that it does not target to maximize profits for the investor unless doing so will expand opportunities for securing and expanding human and environmental well being. It does appear contradictory however the key aspect is that the final objective of social and environmental well being is attained. The term social enterprise has its roots in the United States philanthropy and co-operative circles of the United Kingdom. The wide social impact approach to agribusiness has been promoted by several NGOs and the government. The approach has been to attract investment that is focused on taking on board small holder farmers as suppliers of crops to value addition processing factories or sorting and facilities for horticultural produces. The key point of emphasis is that the small holder farmers benefit from having a ready market and in some cases support with inputs and extension services. The final outcome targeted could be increased incomes and the uplifting of many house holds out of poverty. The organizational business philosophy of such organizations is to look for a win-win scenario. The processing plant is supplied with raw material while the small holder farmer benefits from a ready customer, the income achieved by the small holder farmer may be sustained at levels that keep the business going and the farmer attracted to growing the crop and supplying it to the factory. The relationship exists on some kind of dynamic balance between the two factors. The question to pursue within the Tanzania context is, do we have a social enterprise approach when defining investments in agribusiness .Investments premised around human and environmental well being as the basis of attaining profits. Profits that will not be merely ploughed back into the community, but reinvested into the business to maximize and expand social impact while sustaining all the business principles that are foundational to commercial success. The status and need of inclusive economic growth driven by agriculture with value chain based agribusinesses approaches is best summarized in the quotation that follows.”In nearly all the countries (Africa), the private sector is involved in driving value chains, with the public sector just providing supportive roles. Of particular concern, though, has been how to ensure that scaled-up chains benefit the rural population, especially women involved in primary production. Most chains typically favor better-off farmers, processors and traders while poor actors get squeezed out (Hartmann,2012, Africa Agriculture Status Report 2013, AGRA) Another key quote that drives the argument home in favor of social-entrepreneurial agribusinesses in Tanzania is best expressed in the quote by Hilde Schwab at the World Economic Forum in May this year. “The next chapter for Africa requires us to look both at the tremendous opportunities for economic growth, and the challenges the continent faces in being able to tap into this growth. Social entrepreneurs, and their innovations promoting inclusive economic growth, are critical to improving the state of the world, and therefore the work we do at the World Economic Forum.” A real life example would be great to conclude with. The World Economic Forum (May 2013,Cape Town South Africa) citation for Aleke Dondo with the Juhudi Kilimo agri-financing business states ” Aleke Dondo, often called the grandfather of microfinance in East Africa, built Juhudi Kilimo from two of his strongest passions: microfinance and rural development. He holds a Master’s degree in economics and has carried out more than 30 major studies in the fields of small enterprise and microfinance development. In sub-Saharan Africa, 60-75% of people are employed in agriculture, mostly as subsistence small-scale farmers, and often they have little access to bank loans or technical training. Juhudi Kilimo has provided asset financing to over 7,500 smallholder farmers, roughly half of which are women. The average income of Juhudi Kilimo clients doubles or triples as a result of their loan. In addition to offering loans for rural farmers to invest in productive assets such as cows, agricultural equipment and transport, Juhudi Kilimo offers compulsory asset insurance and life insurance to the borrower at a small cost. These two insurance products ensure that the borrower and her family cannot be further indebted by the loan, mitigating the risks the rural poor often face when becoming clients of many micro-lending institutions. Schwab Foundation Chairperson Hilde Schwab said, “Juhudi Kilimo`s model of providing six months of financial literacy and animal husbandry training to borrowers before receiving their first loan, and then pairing the loan with both asset insurance and life insurance takes a multi-pronged approach to empowering small-scale farmers to create a virtuous cycle of income generation and asset accumulation.” The key issue is that for any value chain, the agribusiness must be driven by the desire for social impact as profits are generated to further expand the impact. This approach is the hope of the thirty one million farmers in Tanzania whose success we all will share in terms of a large segment of the population who can participate in the economy.