Posted on July, 29, 2024 at 02:09 am
Investor Saskia van der Mast spent nearly two decades at DOB Equity, an investment firm focusing on East Africa. She recently stepped down as co-CEO. During her tenure, DOB Equity made several agribusiness and food-related investments. In a recent interview with How we made it in Africa, Van der Mast shared her insights on successful agribusiness models in East Africa and highlighted untapped opportunities in the sector.
Vertical integration: Given the unpredictability of agriculture and underdeveloped supply networks, Van der Mast advocates for agribusiness enterprises to own as much of the value chain as possible, from inputs to logistics. In Africa, companies often need to expand beyond their core business. “You’re not building one business, you’re building multiple businesses,” she explained.
A prime example is Victory Farms, a fish farming company on the Kenyan side of Lake Victoria. Beyond operating hatchery ponds, deep-water cages, and a processing plant, Victory Farms has established an in-house distribution system and a network of retail stores. (Read more: Vertical integration important for profitable agribusiness in Africa, says investor)
Unlocking the potential of smallholder land: In Kenya, an estimated 80% of arable land is owned by small-scale farmers. Smallholder farming on the continent is often synonymous with low yields, limited use of quality seeds and fertilisers, minimal mechanisation, and general hardship and poverty. Van der Mast pointed out that many smallholder farmers in Africa are not necessarily interested in farming; for many, it is simply their only means of livelihood.
DOB Equity’s portfolio company Cinch Markets has tapped into this dynamic by aggregating smallholder farmers in Kenya and renting their land. Cinch then invests in essential infrastructure to support high-revenue activities, such as growing horticultural produce for the export market. Landowners receive a share of the revenue and can choose to either work on the land as employees or pursue other ventures, such as moving to the city or starting new businesses. This model significantly increases landowners’ incomes.
Van der Mast emphasised the need for a new approach in agriculture. “If you look at agriculture and the amount of money that has been spent over the last few years… unfortunately, little progress has been made in the way people are farming, what they are producing, and yields. That’s terribly sad. So I think the whole sector needs to be looked at differently… Yes, land is sensitive and people want to own land. But how can you still allow people to own their land but allow them to create more wealth from it?”
Lack of funding: She also highlighted the scarcity of debt and working capital for agribusiness ventures in East Africa, especially for younger companies: “I’ve spent months of my life looking for working capital for some of our businesses.”
Source:: How we made it in Africa