3. Mechanism & drivers
Drivers for inclusion
Wilfred van der Kooi, MFE’s managing director, believes that Africa must become productive in a sustainable and profitable way. According to this view, much of the money invested in Africa by international organizations, donors or NGOs has failed to address the bigger picture and take a more balanced approach. Instead, Agri-businesses in Africa should be seen in terms of adding value to the environment: farmers can be solid actors in any business models if they are properly motivated to do what they do best.
In the words of van der Kooi, three factors should shape how inclusive businesses in Africa are conceived:
- Market linkages and partnerships: Often skillful small-scale farmers struggle to find suitable markets for their crops. In contrast, private companies possess the capacity to access modern and developed markets. Hence agri-business and farmers can capitalize on each other’s strengths by establishing fruitful partnerships.
- Capital: This is another constraint for farmers wanting to start their own business. A company, however, can allocate or invest resources when needed.
- Knowledge: This is where farmers can make a meaningful impact on the business and, by extension, on their lives. To give an example: before MFE was created, New Horizons produced eggs for consumption on a small scale.
- Mortalities oscillated between 10-15 birds per week. Today, mortalities have dropped significantly thanks to the growers’ good management.
Mechanisms that promote inclusion
In contrast to the poultry operation, proper management does not guarantee egg-layer chickens will lay in accordance with the projected laying curve. In reality, the growers and the company are better off when the actual laying curve comes closer to the projected one. For this reason, MFE has sought a perfect alignment between growers and business since the project inception.
This translated into the following effective mechanisms:
- Financial back-up: Commercial egg production requires in the first place bio-secure, equipped chicken runs. As depicted in Figure 1, MFE provides most of the material and equipment needed, although growers also contribute some of their own materials. Financially speaking, setting up a chicken run is an investment worth 5,000 US$ (layers aside), and the expenses are covered by the company. MFE is nevertheless entitled to remove all materials in case of continued poor performance or theft. Therefore, without the financial back-up growers would face insurmountable challenges.
- Daily supervision: One technical supervisor tours all farms daily. Areas that need continuous monitoring are the number of eggs produced, feed/water consumption and mortalities, and other minor features. Should problems arise, MFE can tackle and resolve the issue before it escalates.
- Financial model: The underlying rationale is clear: layers must produce eggs close to their maximum potential (laying curve), at a low feed consumption ratio and mortalities should not surpass 7-8 per week. If all these things are in place, growers can earn up to 3-4 times the minimum salary in Mozambique (2,000 MZN). In other words, the model rewards good management and penalizes low productivity. If layers are consistently producing eggs well below their potential, MFE discounts that negative differential in the payment. In other words, growers that produce say 15% below their potential will suffer a 15% cut in the profits over the period in question. MFE reserves the right to terminate the contractual relationship with growers if low productivity persists.
- In-kind benefits: In addition to the monthly payment, growers also receive between 10-15 eggs per week for home consumption. Moreover, MFE plans to donate all equipment and building materials to growers after 4 or 5 successful cycles. This measure should motivate growers to work towards a better future for themselves and their families.