In April 2022, a delegation from Tegemeo Cereals Enterprise Limited visited the Toward Sustainable Clusters in Agribusiness through Learning in Entrepreneurship (2SCALE) project in Nigeria to learn more about the formation of agribusiness clusters (ABCs) and the adoption of information and communications technology (ICT) in the agriculture sector. The delegation, which consisted of Tegemeo’s Managing Director, Peter Mutegi; Partnership/Program Manager, Pauline Kinyua; Head of Extension, Zachary Mwenda; Head of Sales, Jackson Makembo; and Head of Social Inclusion, Caleb Mwiti, spent over a week visiting actors involved in Nigerian maize and sorghum partnerships. Tegemeo is a 2SCALE “business champion” for sorghum and pearl millet private-public partnerships in Kenya. The delegation’s educational visit revealed how ABCs have been used in successful backward integration and how technology can be used to coordinate activities across ABCs and markets.
Learning through Practical Experiences in Nigeria
2SCALE employs several learning methodologies; one of these is exposure visits. Exposure visits facilitate knowledge-sharing, because participants from various settings and countries are able to interact and learn from one another’s experiences. These visits allow project partners to encounter the successful integration of 2SCALE’s approaches, such as the formation of ABCs, through practical and real-life situations.
The representatives from Tegemeo were invited on an exposure visit to three of 2SCALE’s business champions in Nigeria.
Technology and the Improved Efficiency of Agribusinesses
The exposure visit started at the AFEX headquarters in Abuja, where the delegation was introduced to the three entities that make up the AFEX group, AFEX Fair Trade Limited, AFEX Commodities Exchange, and AFEX Investment Limited, which facilitate market systems development, trading, and financing, respectively.
The Managing Director for AFEX Commodities Exchange, Kamaldeen Raji, introduced two innovative digital platforms – WorkBench and ComX. WorkBench is an enterprise resource planning (ERP) system that helps the company manage farmer databases, grain and input warehouse inventories, training schedules for agricultural actors, input financing, and aggregation. Raji explained that AFEX uses WorkBench to efficiently run operations for 300 field officers and 126 warehouses, serving 372,000 smallholder farmers across the country. The platform’s mobile version is used by field officers and warehouse managers who may need remote access; the web version is used by the office team in Abuja. The delegation was able to witness how Tegemeo’s own ERP system, supported by 2SCALE, could efficiently manage business transactions for the company’s growing number of farmers.
On the other hand, ComX, Nigeria’s first licensed private commodities exchange platform, revealed the future of grain trading and the possibility of replicating private commodity exchanges in Kenya to the Tegemeo delegation. AFEX demonstrated trading on the platform and its regulation by the Securities and Exchange Commission (SEC), highlighting the challenges and achievements with ComX along the way. AFEX, which was established in the same year as Tegemeo, attributes its tremendous growth and expansion to the use of innovation and technology throughout the company’s operations.
Backward Integration through Agribusiness Clusters
The formation of ABCs is a key pillar of 2SCALE’s bottom-up incubation approach to facilitating inclusive agribusiness. ABCs empower farmers and other local agro-entrepreneurs to access agro-inputs and services, allow collective action and co-innovation, and improve bargaining power. Formation of these clusters, in partnership with 2SCALE, facilitates backward integration of the business champions. For grain aggregators, such as the sorghum business champions in Nigeria, Nalmaco Nigeria Limited and Adefunke Desh Variety Stores Limited, investing in backward integration by working with smallholder farmers is an integral part of meeting the demand of grain supply contracts, reducing transaction costs, and ensuring the quality of grain supplied.
The Tegemeo team visited these sorghum business champions in Zaria, Kaduna State. Managing directors for Nalmaco Nigeria Limited and Adefunke Desh Variety Stores Limited, Abubakar Nuhu Aliyu and Michael Adeoluwa, shared their experiences increasing aggregated volume threefold and controlling the quality of the grain they supply to offtakers. They have been successful in investing in backward integration through the formation of ABCs with support from 2SCALE. The managing directors, whose companies work with over 20,000 smallholder farmers cumulatively, shared the highs and lows of their “inputs for grains” aggregation model; they highlighted that backward integration’s success is largely attributable to the trust and loyalty cultivated through ABC actor interactions. The managing directors also shared their experiences in marketing grain to some of the largest buyers in Nigeria – Honeywell, Cadbury, and Nestlé. Both Aliyu and Adeoluwa have invested in value addition for better grain prices and business expansion in their 20-plus years of operation.
The Tegemeo delegation’s top suggestions for business growth from the exposure visit were:
- Focus on aggregation of fewer high-value crops.
- Build and maintain good business relationships with value chain actors.
The delegation from Tegemeo was also able to interact with one of the more advanced ABCs linked to the sorghum partnerships, Kuki, which has been in operation since 2018. Kuki cluster actors explained how they work together and how the ABC has benefited their agribusiness ventures. This cluster gathering was held to prepare for a governance meeting in which Kuki representatives were able to discuss the high input prices with the business champion, Adefunke Desh. By interacting with cluster actors and being involved in the meeting, Tegemeo, whose ABCs are at the beginning and middle stages, witnessed how advanced ABC actors can define win-win solutions to their challenges through collective action and bargaining.