The article below is taken from VENTURES AFRICA and available at http://www.ventures-africa.com/2013/10/diary-30-ceo-innovation-makes-money-local-farmer/
There is a new small business hero in town. One who built on an idea which now allows small-holder farmers in Kenya to marginally earn a fraction more on their bananas than they would have made if they sold it in the local markets.
Eric Muthomi, founder of Stawi Foods and Fruits, totally redefined value addition. His company is making effort to reconnect society, and provide genuine benefit to surrounding communities. In providing a major buying culture change, he appears to have called time on the model where middlemen served their own interests.
To create sustainable growth, banana farmers in Meru, one of the largest banana producing regions in Kenya, needed buyers willing to purchase their produce at responsible prices. Eric says, ”It has been the same cycle over and over. Farmers would invest heavily in banana farming, only to end up disappointed by an oversupply in the market or poor pay by middlemen. I thought farmers deserved better.”
Middlemen were profiteering at the expense of the farmers because of the low market prices caused by an oversupply of bananas to the market during harvest time. Muthomi believed this situation required a shift.
Farmers reacted positively to this change, as they saw the replacement of opportunistic minded middlemen with a more modest entrepreneur at the top of what is becoming a major institution, Stawi Foods and Fruits.
“I am happy when farmers come up to me and thank me for getting them a market for their product. It is such a satisfying feeling,” says Eric Muthomi.
Partly due to the shadow cast by bananas not being available all year, they usually become cheap during harvest time and expensive in the dry season. Furthermore, the volatility in price was dangerous for bananas, as it was a crop used to avoid famine and served as food buffer in times of scarcity between cereal harvests. Due to this, thousands of farmers remained poor as a result of waste and poor yields from their banana harvests. Lack of storage and processing facilities, bad roads and poor access to markets, also did not help matters.
“I was looking for ways of providing a market for small-scale farmers and increasing the shelf life of bananas, which would rot in farms, especially those belonging to farmers who could not reach the collection centres set up along the tarmac road on market days,” says the CEO of Stawi Foods and Fruits.
The farmers held their breath for many years, as about half of the bananas harvested in Kenya either got rotten, wasted or never got sold. Several farmers were left teetering on the brink of poverty, as they suffered serious losses as their produce go to waste or was sold at throw-away price. Muthoni’s Stawi Foods and Fruits changed that cycle. His company improved farmers lives by gauranteeing an income for them.
Muthoni’s banana flour is big business. On how he came up with his innovative idea, he says, ”My business idea was simple to come up with because in my home community back in Meru bananas were grown in plenty, and also it is not like banana flour is something common in the country. It is a unique product for the market.”
Stawi Foods and Fruits’ competitive advantage is the nutritional value that their banana flour adds to the health of every individual who consumes their product,” Banana flour can play an important role in providing nutrition to consumers and solving the malnutrition problem. Bananas are rich in nutrients, which are absent in conventional flour such as maize and wheat flour. This means that banana flour is a good source of nutrition to …infants and adults,” explains Muthoni.
Another competitive advantage for the company is value addition. We have been strong advocates for African businesses to engage in value addition, and not just concentrate on selling raw products that can be later processed, only for us to import what we had in the first place as unprocessed raw material, Muthomi explains. “The food processing industry is critical in providing a market for farm produce, creating employment and curbing rural-urban migration. Value addition promotes the export of finished goods rather than raw materials and earns the country more foreign currency.”
Viewed in another context, Stawi Foods and Fruits’ rapid growth is creating employment opportunities and empowering the youth and women, which are two groups most vulnerable to being marginalized in any economic set-up anywhere. Eric Muthomi was once quoted to have said,”We are working with a group of 100 farmers. As we scale we will need additional farmers to meet the demand for more raw materials. Farmers benefit by earning more income. They also have a ready market for their produce and do not have to incur additional costs of transportation to Nairobi. In this country if you empower the women and the youth; you are making great strides towards growing the economy. Apart from employing young people, most of our contracted farmers are women.”
Despite the endless entrepreneurship promotional crusades by African governments, little traces on the ground suggests any progress in encouraging enterprise. From chaotic and ill-advised indigenization laws, to blind protectionism policies, not to mention tiresome business registration processes and over-regulation, entrepreneuers have so much to contend with setting up their busineses. ”Like for a food processing business like Stawi, we have to get several approvals and licenses from various government authorities, and it can be tiresome. It would be good if the government could streamline this such that whatever licenses a business needs can be obtained from a single authority,” lamented Eric.
However, the young entrepreneur says, “The best time to start is now when you have nothing, because innovation, creativity and resourcefulness are terms which define entrepreneurship.
“My intentions all along, even when I was studying at the university was to go into business, run my own company. Do not wait for things to be perfect for you to work on your goal, start with the little you have. I had no money, I borrowed capital for the business from my family.”
Business opportunities never shrink. Inspiration, belief and motivation is what lacks. Stawi Banana flour is fast becoming a popular brand, which has successfully served the interests of stakeholders equitably, and created a model and case study for other African farmers and entrepreneurs with an interest in agriculture, value addition and willing to join the African transformation agenda, to rethink their objectives and refocus energies towards creating sustainable agri-based ventures.