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.

Alvan Blanch Cooperation

Alvan Blanch is a brand that has been in agro processing for decades.I have had the opportunity of working with them in 2011 to design a grain storage and bagging plant for a prospective client in Tanzania.Our cooperation has grown since then with us now working on marketing and developing agro processing equipment for them here in Tanzania.Our latest offering as advertised in the press are silo grain storage plants,feed mill processing plants,containerised eddible oil extraction plants and truck mounted fruit processing mobile plants.Call in as per contact details to get more information.

M4P and Competitive Manufacturing

Making markets work for the poor!I learnt a new term yesterday I had a concept of but no name for.If you see my earlier posts you will realize that I have been writing about the need to develop basic forms of manufacturing or value addition that enables poor communities to have linkages with lucrative markets.This is all about including the poor in the value chain.I termed it,manufacturing the only way out of poverty.I advocated for food based or agricultural based processes.In short close linkages to farming with manufacturing being the link to the market. I am perusing the mission of helping small to medium organizations to set value adding activities and improve them.The key issue is to develop small producers to have competitively sound processes and linkages that result in technological transfer.I will be sharing experiences and process improvement measures as I visit the various factories across the country. The key issues in manufacturing competitiveness is defining the basis of competing and setting up strategies that ensure a reliable supply chain. I am glad someone out there is also looking at making M4P work.It can only do so with manufacturing!Competitive manufacturing.We will be focusing on edible oil processing from sunflower seed supply production and demonstrate the application of world class manufacturing principles in a simple process that can do so much for M4P.

Frame works for strategic thinking

I have been studying strategy for more than five years.I am still studying it to this very day.The one thing that i have conluded is that it is a complex field.Many authors immediately re-aasure the reader or student that complex does not neccesarily mean impossible or not attainable.It simply means that strategy is not that straight forward.I am sure that any student of strategy or strategic planning realises that the discipline of strategic thinking occurs in models or structures of thought that guide the asessment of the data or information that forms in puts into strategic thought and then also organises the result. Simplification tends to be the generic approach.The real world provides a myrid of variables and combinations that make it hard to pin down certain aspects.The best strategic minds are those that can intergrate all this information and then define a course of action.There are models for assessing the operating environment such as the famous PEST.There are models for defining the market such as the revenue model,the differentiation and price model,the BCG Model and the demand and supply curve models to mention a few.I recall when studying manufacturing strategy,which infact opened the door for me to study strategy a model based on price,product and service was defined.Underling that were manufacturing objectives and tasks. The models i am discussing are all preset.I just want us to reflect on the capability of using mathematical tools and available data to define a frame work,that suits the problem set and then derive the strategy or aspects of it from there.For example about two weeks ago i was focsing on liniear programming,the simplex methods,it comes in soft ware packages like "Whats best, from Lindo.This approach enables you to define the key variables and come up with the objective function.This approach results in you being able to define a framework however it will be on a basis of simplifying the problem into clear and seperate variables.The good thing about it is that you are defining your own frame work for thinking.The key issue for high level strategy can be how to maximise profits or minimise costs.Linear programing(not as hard as it sounds) will give you a basis for working out how to optimise your variables. Lets work through an example.If you have a distribution net work in a competitive set up and you want to focus on specific volumes per product that will minimise your distribution costs the tool suggested is linear programming.Lets say you distribute products A,B,C,D.Each product has unit distribution costs depending on location ,staff handling and so on.The logic of the calculation will be such that to Minimise(cost)=Ax+Bx+Cx+Dx with A to D being specific distribution costs and x being the number of units.The software will process the calculation and provide with insights on how to minimise your distribution costs.This is a simple,how ever deliberate thought processes around this approach can aid in defining your distribution strategy. I recently came across an MBA programe thats teaching creativity and the application of artistic abstract thinking in problem solving.It was a Canadian business school i think.The bottom line is that ,you can not only solve a real life problem,complex problem that does not have a fitting frame work in existance without thinking abstractly and then translating abstract thinking through a frame work you can use o organise your information in the real world. The long and short in the midst of all the complex strategies is that if the frame work does not exist,don't panic,create one.

Scanning The Environment

I wrote an exam on strategic planning yesterday.Please don't ask me for the results.One interesting concept that came up as i was preparing,was that of the importance of scanning the environment of operation.Many managers will at times think that the events external to the organisation or core operation will not have an impact.If on the other hand they are thought to have an impact,the extent or magnitude is not comprehended.The key question is how can the environment be scanned and who is responsible for doing so?

Hold on for your biggest shock.How many organisations in Africa have you come across that have employed a person dedicated full time to scanning the environment?An employee who looks out for the age old tried and tested PEST events.(Political,Environmental Social Technological changes).I have not as yet.I don't even know what they would be called.A business analyst perhaps,that i have come across,albeit,only a hand full.The lack of scanning the environment results in events that are obvious to everyone not being analysed to check for their impact on the business.

Let me take a simple case in point.America is managing its economy out of recession a range of monetary policies are being applied.Keeping interest rates low and keeping the almighty united states dollar not so strong in order to boost exports.Early in the week Mr. Obama and the Republican leaders agreed to extend the Bush tax cuts for the middle class and the wealthy this has raised prospects for economic growth for the following year and has resulted in a rush for ten year US bonds and that has resulted in the US dollar moving to a high of 1.32 against the Euro.This most likely means a gain also against other currencies not in the G10 such as my home country's Zambian Kwacha or others such as the Tanzanian Shilling and the Botswana Pula.This will of course be to various magnitudes depending on the fundamentals in each country.

The key question to ask is,what aspect of my operation is affected by the movements of the USD?The first for most will be fuel.Those who export will be more competitive prices internationally due to weaker local currencies,well for those that import their inputs, the impact will be directly higher costs.A realization of the change coming will help you take positions by for example reducing overtime to manage the cost of goods produced in the wake of a clear increase in raw material costs.In short we should move away from just getting hit by "stuff" to knowing whats coming towards us and taking immediate positions, "duck."

My point is simple. Scan the environment.

Focused factories

I have been absent for along time!I am glad to say that i am now working full time in my own manufacturing and consultancy company and will be posting blogs more frequently as i share my experiences.

I would love to start at the beginning.I am going to zero in on one word."Focus."I had a discussion with a GM for a processing firm yesterday.As we shared our factory experiences we got to start talking about alignment and focus.It was clear that we both agreed that without these two vital ingredients any factory's performance is bound to nose dive,for some fast,and for others a slow decay,almost imperceptible.

How are alignment and focus achieved.The key tool for that is formalising a road map or strategy for the factory that will be the rallying call for all on the shop floor and for those leading the factory.This formal document often called a "Manufacturing Strategy" or in some cases an "Operations Strategy" is more than just high sounding words.It is a complete plant policy guide to achieving continuous improvement.It comes with clear metrics activities and accountability.

A brief example is suitable at this point.An agro processing plant say cotton fibre for example is largely based on large volumes in seasonal runs.The key therefore is high through put.Volumes should be the focus.The next stage would be to define strategy based projects such as ,setting up reliability systems,redefining processing routes,rehiring e.t.c depending on the specifics of the situation.A focus on the volumes objective will achieve greater through put.

Focus and alignment can not be done without.

And the objective is?

An operations starategy is hinged on defining a set of coordinated tasks that are aimed at attaining a specific competitive objective.How do you define the objective?I will propose a simple step process:

1.Define how you manage to win an order,is it the presentation,the quality of the product,or how quickly you respond to a customer query or you have managed to build efficient processes that enable you to have the best price?

2.Define how your competitors are winning orders,the same set of questions that apply to yourself or your organisation are valid for your competitors.

3.Get your hands dirty ,get down to the basic issues.Say for example as in the case i experienced,the key issue was paying small scale individual raw matterial suppliers in cash and on time,these were spread out over a distance of over 350km.

How did i solve the problem.My team and my self had to define the infrastructure we had to set up.This included setting up communication channels(cell phone sms systems),cash in transit plans and storage.Security,documentation.After executing these specifc tasks the key issue was to measure the performance of the strategy.I set up a time monitoring system to check the duration between cash requests and replenishments.

In any operations or manuafactuing strategy you define, always ensure that you take an inward and outward look at things simultaneously ,and that you get down to the details without getting lost in them.Keep the objective upper most in mind.