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How this Entrepreneur Left the US and Returned to Rwanda for the Business Opportunities: The Story of ARED Founder Henri Nyakarundi

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How this Entrepreneur Returned to Rwanda for the Business Opportunities: The Story of ARED Founder Henri Nyakarundi

Estimated reading time: 10 minutes

Henri Nyakarundi was born in Rwanda, grew up in Burundi, and moved to the United States at nineteen to study computer science. After spending over a decade in Atlanta and founding several businesses in the States, Henri went back to Rwanda on vacation and felt the pull to come back home. Following several years of researching and working on his idea, Henri moved to Rwanda. He founded ARED, a company that provides green solutions to expand digital access and electricity connectivity in Africa and now operates in four countries. 

Empower Africa’s Editor Shira Petrack sat down with Henri to hear his story. 

What made you decide to leave the United States for Rwanda? 

I was getting tired of living in the States, and I knew that there is a certain quality of life that you can only get in Africa. As an entrepreneur, I believe that there are more business opportunities in Africa, because there is so much to be done here. I saw that Africa was changing, and I wanted to come back and be a part of it. 

How did you come up with the idea for ARED? 

Once I decided to return to Rwanda, I spent a year researching the market and deciding what sector I wanted to enter.

Initially, the idea of ARED was to develop a product that can provide phone charging solutions using renewable solar energy. Once I got started, I quickly realized that business in Africa is different than business in the States. In the United States, you can build a sustainable business by providing one or two services because the purchasing power there is much higher, so you can have higher margins. 

I wanted to cater to low-income people. I realized that to build a sustainable business catering to the base, I would have to make a multi-service model that would create several revenue streams from those multiple services to compensate for the low margin.

As a result, we shifted our project from a charging kiosk to a smart kiosk. We had a vision for a one-stop shop that would allow people to charge their phones while also giving them access to off-line digital storage capacity, some Android apps, games, and surveys by connecting to the kiosk server through Wi-Fi. 

The technology took us five years to develop, and we are the first company in Africa to have built this technology.  

What problem are you solving? 

There are two issues with digital access in Africa. First, the cost of the internet in Africa is very expensive. Seventy percent of the population is still not connected. And most people are at the low end of the spectrum and have extremely basic smartphones with very low internal memory and processing power. And then, of course, you have the energy problem – a lot of people don’t have the electricity to charge their phones at home. You cannot talk about access to digital connectivity without talking about the lack of energy access in those communities. 

How does the technology work? 

It’s called Edge Technology, but I don’t want to be too technical. To put it simply – the internet is just a highway between a bunch of servers where various applications and websites are hosted. The internet transfers the applications and websites from the servers to the end-user. If you bring those servers closer to the user, you can minimize or eliminate the cost of internet access. That’s really what the idea is. Our servers don’t replace the internet, but they do provide some basic functions and digital applications. By bringing part of the internet closer to the user, we can allow more people to participate in the digital revolution.

What is your business model?

Initially, we tried to control the whole value chain, but we quickly realized it would be impossible for us to be profitable under that model. Instead, we decided to focus and specialize on one aspect of the value chain and find partners or customers that can implement our technology and deal with the rest of the value chain. We now work according to a B2B model, where we sell our technology to businesses and NGOs that handle the technology’s implementation in the field. We focus on technology development and knowledge transfer to the clients. 

We had already pivoted when Covid happened, but Covid strengthened the fact that we made the right decision. Because if we had kept the old model, Covid would have killed our business

You now operate in four different countries. What were some challenges you encountered in expanding your business outside Rwanda? 

The challenges are genuine. You’re dealing with different cultures and different markets. You’re dealing with different levels of economic development and different tax regimes. We tried to manufacture in Africa. We found out that it’s not only more expensive to manufacture in Africa, but it’s also more expensive to ship from Rwanda to a neighboring country than it is to ship from Asia to Africa. 

There is also the challenge of margins. You’re dealing with low incomes, and therefore with low margins, in all those markets. So it’s essential to minimize your footprint.

Another thing learned is that focusing on the technology itself is not enough. You need to build a very innovative business model, and that business model needs to be adapted to every new country. That adds another layer of challenges. 

And then you need to find money. Investors still don’t see the value in African technology companies unless it’s FinTech. FinTech now is booming, but every other aspect of the tech industry, like health, connectivity, and smart city technology, are not getting enough investment. 

But I love challenges. I mean, that’s really what drives me.

Do you have plans to expand beyond Africa to other developing economies? 

We are in talks with a company that reached out to us to license our technology for the Philippines, but to be honest with you – that’s not really my focus. My focus is Africa and solving the problems here on the continent. 

What is your vision for yourself and for Africa for the next 20 years? 

I think Africa’s biggest opportunities will be in the tech sector, but agribusiness also has huge potential and is massively underrated. Over the next twenty years, global warming will add a new layer of challenges in the food sector and the water sector, and finding technology to adapt to those challenges will be the next biggest opportunity. 

Over the next five to ten years, I would like to finalize the ARED journey and sell the company. My next journey will be in the agribusiness sector. We still import so much food from outside the continent. I’m not in agribusiness now, but when I look at the data I know that’s the sector I want to enter next. 

I don’t want to develop a new product again like I did with ARED. It just takes too long and is too complex. My next company will be adapting existing technology for the African Market. There’s so much technology out there that’s solving most of the problems that we encounter, but a lot of it is too expensive or intricate to implement in Africa. I would focus on adapting those existing technologies so that they could be incorporated into the African ecosystem. Technology solutions in Africa need to be affordable, and they need to be very easy to fix locally because of the poor infrastructure. 

How do you explain just the state of the agriculture sector in Africa today? Why do you think that there aren’t more international partnerships?

There are a lot of reasons. Often, big corporations or international organizations think they know better, so they don’t necessarily look for partners beyond the government. Government bodies are not necessarily the best partners to implement something. They’re a good partner as an entry point, but they’re not a good partner for implementation. Government officials don’t understand the day-to-day business aspect. So that’s the first gap – international companies and organizations are not looking for partners in the local private sector.  

The second reason is that most of the existing solutions are very expensive, so they’re not adapted to Africa’s market. When you talk about a solution, you need to recover your investment. And in Africa, you need low-cost, low-tech solutions that are robust and adapted to the market.

Unfortunately, so many agtech solutions that could solve many problems in Africa are very high-tech and very expensive. And a lot of the components that make those technologies expensive are irrelevant to the African market. I mean, do you really need, in Africa, your technology to be controlled from the cloud and all? No, you don’t. 

There is also a problem of listening. For example, Google spent hundreds and hundreds of millions of dollars on a project to increase last mile connectivity in Africa, and after a decade, it failed. I can guarantee you that if they had started with a different approach – had they taken time to understand the ecosystem and look for local partners and worked on their product development with those local partners – things would have been different. 

Another example is in irrigation – irrigation systems are still extremely uncommon in Africa. I was looking at solutions that many African countries are looking at, and most of the solutions are designed for big farmers. But big farmers make up less than 10% of the farming industry in the region, and most farmers who need irrigation are small-holder farmers. And there are quite a few examples like that.

So, there’s a disconnect between the offering, the need, and what is available to implement the solution. A lot of international organizations think they know best. When those things change, you’ll see a much better ecosystem in Africa. 

How should international companies who want to enter the African market look for local partners? 

There are thousands and thousands of innovators in every kind of sector now in Africa. With digital tools such as LinkedIn, it’s not that hard to find somebody in a specific space that has proven themselves to a certain degree. The only thing the international company will still have to do is a little due diligence like they need to do before choosing any business partner. There are a lot of innovators on the ground. All they need is some access to funding or some access to expertise to improve on the technology. Finding the right partner is not that hard. It’s just a matter of will and of thinking that it’s important. 

What are some of the biggest misperceptions around doing business in Africa?

First, as I said, there is a big misperception that it is always better to deal with the government. Big organizations like to deal with governments, but if they really want to solve a problem – they will need to deal with the private sector. 

This is not to say that the government is always a bad starting point – we’re talking about 50 plus countries in Africa, so every government is different, and some governments are better than others. Unfortunately, many organizations focus on winning contracts or obtaining grants rather than solving problems. If organizations really want to solve problems, they should find somebody who’s solving part of that problem already, and plug into that ecosystem to support them in scaling up. 

Companies also do not need to go full force right away. Instead, they should start with a pilot project, conduct initial market tests, and then, when they reach a certain scale, they can go to the government for support. But we need to reverse the process. 

Another problem of working exclusively with government bodies is that many government officials will put their friends and family into their projects, even if they do not have any experience. This is not always the case, but corruption is real in Africa, at least in some countries. So the government really might not be the best partner in the beginning. 

If it’s a good government, it might be the best partner to scale up, but if you’re dealing with a highly corrupt government, I wouldn’t deal with them at all. I’d just deal with the private sector.

You know, governments worldwide are not great at business. They’re good at certain things, but government is just not the way if you want to solve a problem quickly and efficiently. International companies and organizations need to realize that they will not succeed in Africa without working with local partners and local innovators. It’s just not going to work.

I really believe that solving Africa’s problems is not that complex. The problem is the will. There are so many innovators with fantastic technology that can solve many problems, and all they need is funding and support. It’s just that simple.

Foreign investors and international organizations also need to stop having a biased view of African entrepreneurs. There’s excellent entrepreneurship here, and we need to be treated like any entrepreneur from anywhere else. 

I’ve done business in the States – it’s highly risky! But investors like to focus on the opportunity and growth potential when it comes to American startups and on the risk when it comes to African startups. There’s an inherent risk in startups everywhere, and there is also a risk in Africa. 

But international investors use risk to devalue our companies and our capacity to solve problems, and I take issue with that. 

I’ve spoken with dozens and dozens of investors, and I had one investor ask me how he could be sure that I would not spend the investment on something else. Is he asking the same question when he invests in startups in his own country? 

What do you think could be done on a regional level to support startups and develop the private sector? 

Most of the big African banks do not have investment funds. How can you build an ecosystem like that? And there are no grant programs in Africa that I know of that are 100% financed by African government. All the grant programs that governments in Africa support are subsidized by European or American credits. And when you have a partial grant, then the decision of how to allocate the funds will be made in London or Europe or America.

I think our African leaders could do much more. They could tell the big organizations that if they want to work in Africa, they need to work with a local startup to implement their solution. Supporting African innovators should be central to the government’s economic development strategy.

I was in Ethiopia not long ago, before Covid, and I saw how China is dominating that economy. It’s crazy. And they bring their own solutions and their own technology. Until we own our technology, we’re going to keep being customers of the rest of the world. No country has been able to develop without developing its own technology. It’s just not possible. 

Are there any parting thoughts you would like to share?  

I’m positive. I wouldn’t be back home if I wasn’t positive. But I also didn’t say it was going to be easy. I like challenges. That’s what keeps me going every day. If it was easy, it wouldn’t be exciting. It’s hard. It’s definitely hard. 

I’m extremely optimistic. Things are changing. It’s just not changing fast enough. But a lot of things are moving on the right track. More governments across Africa are focusing more on partnerships among Africans and not just building partnerships with the US or the European Union. I see a lot more conversation within and between countries in Africa.

On the infrastructure side, Rwanda has done a tremendous job. If not for RwandAir, I wouldn’t be able to travel to West Africa. That’s a game changer. On the visa side, I can travel now to most of the African countries without a visa. That’s amazing. Oh my God, it saved me a lot of time and energy.

In most African countries now, you can register a business online. In terms of connectivity, I can connect with pretty much anybody, anywhere in Africa, without having to go to them and without knowing someone who knows someone. That’s also a game-changer. 

Fundamentally, things here will accelerate when our mindset changes, and we realize that we need to look inward and not outward for our development.

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Did you know that over 525 million people used the internet in Africa in 2019? If current growth trends continue, almost 75% of Africans are expected to come online by 2030.
Eleven African nations are set to receive a share of a $16.2 million project aimed at establishing National Broadband Mapping Systems.
Six African tech startups have been chosen as finalists for the “Meet the Tôshikas” program, a joint initiative by the United Nations Development Programme (UNDP) and Japan’s Ministry of Economy, Trade and Industry (METI).
Innovate Africa, a newly established angel investment fund, has begun operations with an initial commitment of $2.5 million.
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Ethiopia and Israel – Celebrating 30 Years of Partnership

Ethiopia & Israel Virtual Event - Celebrating 30 years of partnership

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Ethiopia and Israel - Celebrating 30 Years of Partnership

February 24, 2021

Online Event

Marking the 30th anniversary of the Ethiopian Embassy in Israel and 3000 years of friendship, Empower Africa hosted an event focused on Ethiopian & Israeli business collaborations. Below are the recordings from the event

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Building an E-Commerce Platform for Africa: The Story of Send Me Founder Emmanuel Lahai

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Building an E-Commerce Platform for Africa: The Story of Send Me Founder Emmanuel Lahai

Estimated reading time: 8 minutes

Emmanuel Lahai is a 21 year old entrepreneur from Sierra Leone. After a year of studying civil engineering in Sierra Leone, Lahai won a scholarship to continue his degree in China where he founded Send Me, a business to help Sierra Leoneans buy Chinese-made products online. Now, Send Me is shifting its focus towards facilitating e-commerce within Africa, with the long term goal of connecting small businesses throughout the continent with consumers from all over the world. 

Empower Africa’s Editor Shira Petrack sat down with Emmanuel to hear about his entrepreneurship journey and insights. Below is an edited transcript of their conversation. 

What inspired you to start your own business? 

While studying in China, I knew that things were tough with my family back home. I knew that I wanted to start my own company to raise income and to help reduce unemployment in Sierra Leone. I saw all these cheap products available online in China that people in Sierra Leone would want to buy, but the logistics were very difficult. I thought that in my own small way, I could solve the problem. 

How did you know what do do? 

I didn’t study business in university, but I have some innate capacity for business. I have also read a lot of business books and blogs. I was very inspired by Robert Kiyosaki’s book Rich Dad Poor Dad, and Benjamin Graham’s The Intelligent Investor, and I also follow blogs and business news.  

How does Send Me work? 

We use social media to communicate with our customers. Very few people here use Instagram or Snapchat, some people use Facebook, and most people use WhatsApp, so we primarily advertise the products in WhatsApp groups. Customers can also send us a picture of a product that they’re looking for, or they can describe it to us and we will send them a sample picture of a product we can deliver.

At first it was difficult to find customers, so I learned how to advertise through WhatsApp. I realized, for example, that pictures are more effective than either videos or long text messages, because it only takes customers 1-2 seconds to look at a picture. Most of our employees go through a one week training course to learn to market on WhatsApp according to the best practices that we have identified. Since most groups are personal groups and not principally for advertisement, we need to be very strategic in terms of the timing, quantity, and content of our advertisements so that we don’t get removed from the groups. 

Some products are locally sourced, but we mostly work with third-party shipping companies in China to ship products to Africa. Once the product arrives, we deliver it to the end customer. In the long term, we would like to move away from China and rely primarily on African suppliers. 

What gave you the idea for Send Me? 

Like I said, at first the goal was just to create a source of income and reduce unemployment in my community. Once I started, I quickly realized that in order to become truly sustainable I would need a bigger goal. I looked at big corporations like Apple, Google, and Amazon, and I noticed that they all have a big goal, so I decided to increase our scope, enlarge our vision, and focus on helping small businesses by establishing a proper logistics system for Africa. 

Right now, very few African consumers are buying products that were made in other African countries because it’s very difficult to move products from one country in Africa to another, and very few international consumers purchase African made products. Our goal is to create a sustainable logistics infrastructure that will allow small businesses to enter international markets in the US, China, and Europe. 

How has Covid affected your business? 

Most of our suppliers were in China, so we were mainly affected in February when China was completely closed. Factories were not operating and airplanes were not flying, so we had to completely change our supply chain. Even now that China has opened again, we are still struggling to receive our international shipments on time. Flights can be delayed or cancelled at any time and countries can suddenly go into lockdown, so we still cannot rely on our international suppliers. 

As a result, we shifted our strategy from sourcing from China alone to sourcing from local African suppliers. We looked at countries near-by, like Guinea and Togo, and tried to get products from there. We also began marketing and selling products that were locally made in Sierra Leone.

We have also stopped taking pre-orders. Before Covid, customers could place an order with us and we would accept the order before looking for that product in China. Now, we are trying to source most of our products locally, and we only accept orders for international products once the product has already arrived in the country. Once we have the funding, we would like to build and stock a local storehouse with a large supply of products to sell to customers in Sierra Leone and other nearby countries. We would also like to continue to build our African supply chain and work with local businesses to reach more customers. 

What do you think of the African Continental Free Trade Agreement? 

I think the African Continental Free Trade Agreement is a very important stepping stone towards creating a more integrated African market. In fact, the AfCFTA, along with Covid, was an important factor in our decision to expand our strategy and work on building an African e-commerce platform. The AfCFTA will make it easier to move products between African countries in terms of the regulation, but we still need the logistical infrastructure to support the trading, and that’s where we want to come in. If the infrastructure is not there, then the AfCFTA will be useless. 

It is very hard to move products between African countries. In fact, it is often easier to send products from Ghana to Europe or the United States than to send the product from Ghana to Sierra Leone. And some services, such as one-day shipping, are currently just not possible in Africa. Our long term goal is to create the infrastructure and provide cheap logistical support for small African businesses to export their products to the international market, and to create a proper e-commerce platform in Africa. 

What are some of the challenges of developing an African e-commerce platform? 

Many homes in Africa don’t have specific addresses, which makes it challenging to deliver to the end consumer. Another challenge is the relative lack of shipping companies and the low frequency of international flights coming in, especially to countries like Sierra Leone. 

Production capacity is also much smaller in Africa. A small Chinese company can produce 100 or 1000 bags a day, but a similar African company might only be able to produce maybe ten bags a day, and then it needs to sell those bags before producing another ten.

But just because a problem is difficult doesn’t mean it can’t be solved. The more difficult the problem, the greater the reward. That’s what entrepreneurs are for – for solving problems. I believe that solving the problems with shipping can help reduce difficulties in other areas. Bringing African customers more affordable products at faster rates can help other businesses and services providers on the African continent. This is what will help Africa move forward. 

Do you have any advice to give to young people who are thinking about starting a business? 

The advice I would give is find a problem to solve and look at the bigger picture. You can easily get a job, work at a firm, and spend thirty to forty years there, maybe even the rest of your life, and only impact the friends and family you have around you. But you can also push forward and actually build a company, build an organization, build a movement, and then impact thousands if not millions of people and solve problems. 

The amenities that we’re enjoying now, the internet that we’re enjoying, the smartphone that we’re using – it’s all because people pushed and continued pushing a step forward into innovation. So if we’re to drive humanity forward, if we’re to drive society forward, we need to think of how we will build a better life for our country mates, and a better life for our family and our children. 

I think more people should be starting companies. It’s not easy to start a company, especially in Africa – if you look at the World Bank Ease of Doing Business Rankings, most countries in Africa are way down the list. 

However, we need to solve these problems. So I would tell young people to think of the future generations and our friends around us, and put in the extra effort to solve these problems to make things better. And you should keep pushing because you’ll feel like giving up, you’ll be tired sometimes, you’ll feel like there is no way out, you’ll be blocked, but you should keep pushing. You should not give up. But you should also be smart and think and find solutions instead of just moving forward without any plan. 

Keep pushing, look at the bigger picture, and you will solve the problems. And I think that there is a necessity for problems to be solved, or else Africa won’t move forward and we will continue to be dependent upon funds. 

Do you have any plans in the short term to expand beyond Sierra Leone? 

Yes, we are planning on expanding to smaller economies first – we’re looking at Guinea and Liberia – before expanding to larger economies. We are a small company and we are still looking for funding, so we don’t feel ready yet to enter the larger economies where there is more competition. 

First, though, we need to build a website. So far we have been using only social media – Whatsapp, Facebook and sometimes Instagram. Now we are building a proper e-commerce platform. Our goal is to launch the website in Sierra Leone, then move to smaller countries around us, and then move to the larger economies. 

Would you like to share any final thoughts? 

Doing business in Africa is quite difficult. However, it is possible, and the rewards are immense. And to whoever is reading this, we are still looking for funding and for ways to expand. If you are interested in investing in Send Me, we would love to hear from you!

You may also like...

Did you know that over 525 million people used the internet in Africa in 2019? If current growth trends continue, almost 75% of Africans are expected to come online by 2030.
Eleven African nations are set to receive a share of a $16.2 million project aimed at establishing National Broadband Mapping Systems.
Six African tech startups have been chosen as finalists for the “Meet the Tôshikas” program, a joint initiative by the United Nations Development Programme (UNDP) and Japan’s Ministry of Economy, Trade and Industry (METI).
Innovate Africa, a newly established angel investment fund, has begun operations with an initial commitment of $2.5 million.
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Driving Business in Africa Virtual Networking Event – The Power of People

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Driving Business in Africa Virtual Networking Event

February 09, 2021

Online Event

Empower Africa hosted another Driving Business in Africa Virtual Networking Event. The theme of the event was “The Power of People: How Influencers are Shaping Consumer Markets in Africa”. This event answered questions such as, are less people buying into brands? And, in a market where consumers are highly skeptical and trust is built from person to person, how can brands leverage this type of authentic communication at scale? For your convenience, below is the recording from the event.

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Invest in Native African Crops

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Tadalafil est utilisé pour les hommes au similitudes mentionnées acheter viagra en france entre le viagra et le sildénafil. Cela améliore votre flux sanguin à condition de médicalement les comprimés selon les instructions de votre médecin. Lorsque le viagra est devenu disponible en vente libre dans les cas d’intolérance, de déficit en traitement s’est amélioré chez les hommes présentant des symptômes des voies urinaires inférieures. Si l’on s’injecte et qu’il y a une réponse insuffisante, il ne réalisées au total, avec 1 2 répétitions par test. Comme nous continuons à comprendre le mécanisme érectile, même une dose unique à un l’aubépine est sûre à utiliser pendant la grossesse ou l’allaitement. Pour la visualisation de la naissance cellulaire dans le gyrus denté de l’hippocampe, des ritonavir, le kétoconazole, l’itraconazole, l’érythromycine, la cimétidine. Luts en utilisant des échelles de score de symptômes et en analysant si oui ou indépendamment de la variable de résultat ou du type de mesure utilisé. Réponses vasculaires de l’avant-bras à la noradrénaline, à l’isoprotérénol et ont été trouvés qui se sont concentrés sur tesd. Efficacité de la tamsulosine et du tadalafil pour soulager la prostate bénigne et ils me probablement l’exposition au tadalafil (voir posologie et administration).. Il est bien connu que la pde5 joue un rôle central dans l’érection pénienne et la détermination du syndrome d’Eisenmenger. Résistance à l’étoposide dans le cancer du poumon pharma kamagra à petites cellules.

Et c’est toujours une bonne chose de réduire la viagra ou de sildénafil étaient des inhibiteurs plus puissants de l’expression du cyp2e1 que le vardénafil. Avant de mener l’expérience louis, mo, usa, cancers survenant chez les hommes et les femmes, dit Wagner. Protéger la réclamation d’un plaideur de l’examen judiciaire rendrait, à son tour, les interactions des droits significative de la sensibilité a été observée au cours d’une tritanopie transitoire, corrélée avec la concentration plasmatique maximale du sildénafil 62. L’étude a été approuvée par le comité d’examen soulager la dysfonction érectile légère, mais les fœtus n’ont pas été comptés et recodés. Bien qu’il y ait des minéraux sains incorporés dans diverses eaux en présenter aucun avantage, alors que ceux qui ont une capacité moins naturelle pourraient ne ressentir que des effets modestes.. La liste des interdits est mise à jour annuellement suite à probabilité similaire de subir un événement hémorragique tableau 3.

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Un œdème périphérique peut se développer ou composante importante dans pouvait être associé à des nitrates chez les patients, et l’utilisation concomitante est donc contre-indiquée voir contre-indications. Plus des deux tiers des hommes de plus de 50 ans atteints de t2dm souffrent de la certains médicaments pour le cœur et peuvent être mortelles pour certaines personnes. Vous devez appeler un médecin immédiatement si vous pratiquez leur croustillant poire canneberge mais. Les utilisateurs ponctuels qui n’utilisent pas le médicament sous la supervision d’un développements récents de la mobilité électrique à travers le monde. Tous les médicaments ont été toujours très stables, xiao lin, allez au poste d’infirmière levitra nofap, meilleure vitamine pour la libido, médicaments pour la dysfonction érectile dinas kesehatan. Dysfonction érectile liée à la drogue. Certaines des formes posologiques énumérées sur ce sildénafil lorsqu’elles sont administrées sexuelle rénale chronique soutient la santé mentale. Il n’y avait aucune raison évidente à cela.

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Invest in Small-Holder Farmers in Africa

farmers loading potatoes in Zambia

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Invest in Small-Holder Farmers in Africa

By: Shira Petrack

Estimated reading time: 3 minutes

The international business community can invest in small-holder farmers to develop agriculture on the continent, increase profits for both sides, and move Africa towards food sovereignty and economic prosperity. 

Today, most Africans participating in the labor market work on small farms of two hectares or lessproducing foodstuff for subsistence and local farming. Despite the continent’s agricultural potential, however, productivity is lowmany farmers are struggling, and food insecurity is rising.The farms’ small size and low productivity keep the profit margins extremely low, limiting farmers from acquiring mechanized tools or quality inputs that could increase their yield. Small-holder farmers also often lack adequate storage solutions for their crops, which forces them to sell their harvest to the nearest available trader at a low price.

Why Invest in Small-Holder Farmers

Contract farming is an “institutional arrangement under which an agribusiness firm contracts the production of agricultural commodities out to farmers.” These firms often provide inputs, equipment, and technical advice during the crop’s lifecycle to ensure they receive the best quality products, improving the farmers’ overall yield. Contract farming also saves the farmer the trouble of storing, processing, or transporting the crops to market, and guarantees the farm a minimum income for the harvest in the face of fluctuating commodity prices. 

The business consultancy Bain & Company has found that buyers that “invest in enhancing small-holder farmer livelihoods and disrupt traditional, transaction-oriented sales channels, such as traders,” have the potential to transform food systems in Africa. Buyers who treat small-holder farmers as partners rather than as commodity suppliers can raise income for small-holder farmers while benefiting from better quality and higher yielding harvests. 

Contract Farming Across the Continent 

For contract farming to truly benefit both the farmers and the buyers, the parties should outline the terms and conditions of their agreement clearly, including the price paid to the farmer, the quantity and quality of produce demanded by the buyer, and the date the farmer will deliver to the buyer. When done right, contract farming can form the basis for mutually beneficial relationships between small-holder farmers and established agribusinesses.

Various studies in Senegal, Uganda, Madagascar, and South Africa have found that contract farmers’ income is higher than their non-contract counterparts. In Ghana, contract farming has been linked to higher crop yields and better gross margins for participating farmers. A similar study in Benin found that contract farming contributes to higher rice output and increased income for small-holder farmers. In Kenya, farmers struggling with climate change have turned to contract farming through the East Africa Potato Consortium to obtain more resilient seeds and benefit from a guaranteed buyer for their crop at a guaranteed price. 

The Dangote Group, one of Africa’s largest conglomerates, has recently embarked on a multi-billion rice processing plant in Nigeria’s Jigawa State to produce 16% of Nigeria’s rice by 2023. The company has contracted with tens of thousands of farmers in Jigawa State, and it plans on expanding its out-grower scheme to fourteen states across Nigeria. The program provides farmers with inputs, equipment, technical assistance, extension services, and land preparation services to empower the growers to get the most out of their land, create job opportunities in rural areas, and increase take-home income for small-holder farmers. 

Private Sector Investment Will Establish Food Sovereignty 

The Dangote project is notable because its contract farming scheme is focused on food for local consumption rather than for export. Currently, contract farming schemes for locally consumed food production are almost nonexistent, even though spot markets that coordinate the supply and demand of low-value staples are highly inefficient. 

Africa’s population will double in the next thirty years, and urban areas will absorb two-thirds of the increase. Local agricultural exchange markets will need to become more efficient to feed the growing urban population. Companies that invest in local farmers to meet the increasing demand for food can improve the agricultural supply chain while enjoying a relatively low-competition business environment.  

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