Choosing a Second Village

The work we are beginning in villages is incredibly exciting. Modest investments show the potential to change thousands of lives. And we are addressing the problems of hunger and poverty at its root. We are interested in value chain development and agricultural investment. But what makes our program really unique is that we ask people what they want to do. We don't tell them. Most of my time on this trip has been related to this effort.

We have already chosen the village of Ilambilole to work with. This was where our church had been engaging for more than a decade. After a review with local people, there was strong agreement that it was a great place to start. It was hard working, highly productive, and has a pastor that has stood up to corruption.


(Pictured, corn fields near Ilambilole)

There is a risk in starting with only one village. For example, a drought could delay or cause a failure in the project. Local leaders argued that we should start with three villages to assure the ability to demonstrate success. But there is risk in being too aggressive, as well. The first time you do anything is the hardest. We have things to learn. So we compromised on two.

We needed to choose a second village.

It would be handy if it was near the first one, but then it could suffer drought at the same time. So it needed to be geographically at some distance. As we talked about it, we thought we should find a different climactic area altogether.

(Pictured, a typical meeting with village leaders)

Tanzania is quite remarkable this way. There are numerous micro-climates. At times you find yourself in a new climate every 20 miles. (Because of the poor roads you might be going only 20 miles an hour, too.) We decided to go to a really different climate. Ilambilole is flat and tends to be very dry half of the year. We decided to find a wet region that was also in the same district. We consulted with local and American agricultural experts. Then we talked to local people that could talk about the 'character' of villages. There were about 75 to choose from. Finally, we narrowed it down to four.

Then we spent a half day in each village meeting with leaders and surveying the local outputs. It was a wonderful experience. We posted the results at our website, including the original survey of Ilambilole. They are really interesting:

http://www.cheetahdevelopment.org/cheetah/docs/iringa_district_village_survey.pdf

Here are some highlights and impressions:

1. Ilambilole is a stand-out and was a great first choice.
   
2. There is a strong distinction between villages that are truly subsistence (they eat all they grow) and those that have begun to sell some of their crops. The latter are thinking about markets, profit, and quality.
   
3. The terrain is amazing and beautiful.
   
4. The people were all passionate and hard working. Every meeting ended with speeches by local people. They carefully made their case for why they were the best village to work with.
   
5. I was amazed to see that farmer cooperatives are nearly inevitable. If you ask people how they will solve their problems, they already know that they need to work together. Please realize that in Tanzania farmer cooperatives have been models for stealing from the poor for about 40 years so this is not an answer that I expected.
   
6. People don't want handouts, they want opportunity. They are looking for a way to succeed with dignity.
   
7. I wanted to choose every village I was in.
   

Well, except for Bomalang'ombe. The road was so bad. The springs on the truck were cracked and so there was no rear suspension (a later failure was coming). Three hours later I literally arrived in pain. I thought to myself, 'I never want to come back here again.'

I felt the Spirit move in my heart as I thought this…'You might be surprised.'

(Pictured: the fields around Bomalang'ombe - CLICK ON THIS ONE!)

The Rich Returns of Investing

The following is an email exchange between three people: a supporter of
Cheetah named Mark, a friend of his named Larry (name changed since I am
printing without permission) and myself, Ray. I thought the questions that
Larry raised were important and valid and so I wanted to make sure that
everyone had a chance to think about them.

Ray - Larry is good friend - very bright fellow. You'd enjoy meeting him
when you're back in MN.
All the best to you for a wonderful Thanksgiving holiday [a day late but
hope the glow flows over].
Mark
(Larry writes:)
Hi Mark,
Thanks for the introduction to Cheetah! These ideas look creative and valid.
Of course, when we consider investing, rewards must be commensurate with
risks. Being completely clueless as to the risks of doing business in
Tanzania, I did some quick research.
Source: "Doing Business 2009, Comparing Regulation in 181 Economies" The
World Bank
Tanzania
Ease of doing business rank: 127/181 countries (2008 rank was 124/181)
Category rankings:
Starting a business - 109/181
Dealing with construction permits - 172
Employing workers - 140
Registering property - 142
Getting credit - 84
Protecting investors - 88
Paying taxes - 109
Trading across borders - 103
Enforcing contracts - 33
Closing a business - 111
No reforms (positive or negative) in 2007/2008.
Property issues and employment look to be the worst problems. I hope Ray is
prepared to deal with frequent setbacks.
I signed up for the Cheetah newsletter. I'll bet it would be fun to meet Ray
at some point.
Enjoy the weekend!
Larry

(Ray writes:)
Mark and Larry,
Thanks for thinking of us! I will look forward to meeting you in January
when I am in the states.
Today I drove deep into the southern highlands of Tanzania working on our
project with poor tea farmers. I 'suffered the setbacks' of a flat tire and
then broke the leaf springs on the pickup. We found someone to start repair,
trusting them with adequate cash for spare parts and the keys to the truck.
We then hitched a ride another half hour deeper into the countryside with no
return ride arranged.
This is one of the most beautiful places on earth and I literally felt
almost a spiritual ecstasy at times. The emerald green mountains covered
with tea and eucalyptus forests can take your breath away. The people are
likewise beautiful. The area is so fertile that the trees reach 75 or more
feet in 5 only years. They grow so fast that they often lack bark and the
trunks look like giant bamboo.
I met with the tea processor and found a way to securitize our loan for
trucks to the tea cooperative farmers. Mkonge Tea Block Farmers is a coop of
523 families making about $1 per day, among the poorest people on earth.
Net, net, we expect to quadruple their income.
I'm familiar with the indexes you sent and they don't show how hard these
people work - it would take a small book to describe it. The way to change
these indexes will come more from engaging with people than from condemning
their failures.
You're right of course. Reward must be commensurate with risk. And we
provide the opportunity to dramatically change the lives of thousands with a
small investment. That's a high reward to risk ratio, indeed. Even better,
we have a reasonable and justified expectation that we will be repaid.
We give our investors the ability to diversify their portfolio so that part
of it is working to change the lives of the poorest of the poor. The type of
returns we offer are materially modest only to the investor. The net impact
is, well, how do you measure the value of changed lives?
By the way, I returned safely to my room, quite late but in good spirits
with a healthy appetite. If you appreciate tea, I will bring you some when
we meet in January. It's some of the very finest in the world.
Peace,
Ray
Postscript: (Please see the other blog on tea farmers - you can find it by
keyword 'tea' on the left.) Since we last met these farmers, there need has
actually grown more acute. They have worked hard to grow more tea, creating
their own nursery, expanding their fields, weeding carefully, etc. These
people work so hard! But the trucks are so far behind. Now they have been
restricted to having their tea collected only three days a week - so their
production is cut in half. We were there on a day when they were allowed to
pick. Yet we saw that at every collection center, they were waiting for
trucks to arrive. This degrades the quality of the tea and reduces their
income further. We must act to help these people who are working so hard!
And the investment we make is securitized by the tea factory. How could we
not do this?

Kibaigwa Market

Hi everyone,

Although some of these pictures may be less than interesting to you, there is a team of guys working on engineering problems around grain handling. I'm trying to get a couple of them to write a blog, as well. They are great guys. Hey Matt and Bob, how is it going?

If you would want to join the team please send your interest to info@cheetahdevelopment.org

At the bottom is an explanation of what you are seeing here...

A scale for filling bags. See the weights on the right?

The cleaning line that cleans maize, removing dirt, cobs, dust and rocks.

Filling the cleaning machine from the top.

The French maker of the cleaning machine.

A closer view of the cleaning machine. It cleans the corn and then drops into the trough. From the trough it is lifted and dropped into the bag scale on the right. The long pipe going left to right carries the debris out of the building.

An actual page from the day's maize sales.

Lot's of debris in the corn! See all the pieces of cobs? That because the remove the kernels by beating the cobs with a stick.

The equipment distributor. - The other side of Africa!

If the corn is not dry enough, it is spread out here in the sun.

The inside of the market with the really heavy bags (200-250 pounds).

The chalkboard with the previous day's prices.

The maker of the scales.

The loading dock for buyers. Notice these are not bulk trucks!

On November 15th I visited the Kibaigwa market. It's famous across the country for setting up a real commodities market. It serves maize (and a few other grains) farmers in a region near Dodoma, the capital of Tanzania.

When farmers and buyers enter they see a blackboard with the previous day's prices. Then there is a small negotiation room where farmers and buyers can meet. Buyers look at the product and bid prices. There is security for the money exchange - all cash. Then farmers unload, optionally it is cleaned (only 30% opt to clean thinking they are somehow paid for debris but buyers pay less for uncleaned maize), then it is bagged and loaded on trucks. There is a weigh bridge to track inputs and outputs. Current price for maize is
for 377 shillings per kg. (1330 shillings per US$) A typical farmer in Tanzania may only sell a few bags as income for the whole year. By coming to this market they get about twice the going rate because there is no
middleman. On this day it was about 45,000 shillings per day. But that's less than US $35. Some of the better small village farmers might have 15 bags to sell. That's still less than $1 per day income.

Notice that grain is not handled in bulk. Everything is bagged. The bags are so heavy - over 200 pounds - that it takes three really muscular guys to lift one and then one guy carries it on his neck! I wanted to take a picture but that often offends people here.

This is great to see developing in Tanzania because it is connecting farmers to markets.

Catching Up

Hello Everyone!

My apologies for not posting blogs for a while... We have been incredibly busy. So much is happening and Cheetah Development is no longer a newborn kitten.

Here’s a quick update catching you up until the current trip to Tanzania. In one page we will cover three months…

First of all our agricultural strategies are developing sophistication. This is the heart of our work in Tanzania and it needs to be: over 70% of people are subsistence farmers. Perhaps close to 80% of the country is involved in agriculture in one way or another. President Kikwete has introduced a development plan called “Kilimo Kwanza” or Agriculture First. This approach has been well supported by the Prime Minister Pinda, as well. Cheetah’s work is aligned with the national development approach and therefore we are not swimming upstream. Better, it appears we will have some local help, including: red tape reduction, supportive policies, incentives, and some financing.

In previous blogs we have written at some length about farming and food management. That writing was continued and is posted in a single document on our website at the following link: (will post soon!) Please take a look at it. We would appreciate any comments you have.

There is a much shorter read that in two pages describes the essence or our strategy. That is at this link: www.cheetahdevelopment.org/cheetah/docs/agricultural_investment_strategy.pdf You won’t get any of the local Tanzanian color but it summarizes our approach.

Second, we selected the projects we will support first and they are really exciting. (Check them out here: www.cheetahdevelopment.org/cheetah/docs/projects/project_cutsheets.pdf ) Our estimate of their impact is that a $25 FEEDS A CHILD FOR LIFE! Want to know how? Read our description here: www.cheetahdevelopment.org/cheetah/docs/white_paper_the_orphanage_dilemma.pdf In the coming weeks we will provide more information about each of these projects through our newsletter. Don’t subscribe? Sign up here: http://www.cheetahdevelopment.org/

Third, we have been in the USA for a few months. We have been focused on raising support, finding technical help, and getting our investment papers developed. It’s amazing: you can diversify your investments or saving to put part of it into helping the poorest of the poor! Some of your money can work for you and some can work to help others. This is a great opportunity; don’t miss it. Please go to our investor section here: www.cheetahdevelopment.org/cheetah/pages/invest.shtml

Now we are back in Tanzania working. Already many lives have been changed. We are teaching symposiums on business to hundreds of students, consulting with dozens of small businesses and helping them to find ways forward, and meeting with villages and showing them the opportunity in their midst. Much of poverty begins in the mind. As one local pastor said, “You are unlocking minds.” We will write of our time here in coming blogs.

Our deep gratitude to the many people who are faithfully supporting this work!

Peace,

Ray

Guiding the Flock: Pastoring through Chickens

(Summary: the link between work, faith and community is explored.)

Today my friend Steve Snider introduced me to a chicken operation in northern Mozambique near the city of Nampula. The entrepreneur, Andrew Cunningham, was a pastor in Zambia. He had a long illness that left him weak for a few years and gave him a lot of time to think a pray. Strangely, he felt that God was calling him to go to Northern Mozambique and farm chickens. This is at the very least a strange call on a pastor’s life. Andrew knew nothing about chicken farming. He couldn’t speak the language and he didn’t know the place.

At the same time, God was working. My friend Steve was assigned a project to grow the chicken industry in Mozambique and so his job was to find farmers he could help. You’ll never guess but they ended up together. Strange, huh?

Meanwhile, a wealthy chicken farmer from Iowa was visiting Mozambique looking for ways to make a difference. He found a couple of worthy causes to donate to but nothing really captured his imagination and heart. He stopped in South Africa on the way back to the US for a little relaxation. By chance he ran into Andrew’s wife and daughter at a hotel and after a little conversation invited them to dinner. They never talked about chickens and everyone went home.

A little while later, Steve is wandering the USA looking for someone who knows something about chickens. He gets connected to the guy from Iowa. They are sitting talking and Steve tells him about this farmer in Mozambique named Andrew Cunningham. “Wait, did you say his last name is Cunningham?” Sure enough it’s the same family he met in South Africa.

A few weeks later Iowa meets Mozambique and the Pastor now Chicken farmer has an investor. Strange, huh?

But why would God call a pastor to go and raise chickens in a foreign land?

(A picture of Andrew Cunningham and his wonderful family.)

Andrew said to me, “What’s amazing to me is that the impact I am having as a chicken farmer is greater than anything I was able to achieve as a pastor in my own country. These people never had jobs in their life nor has anyone in their family. They are the first generation to work. We have to teach them everything related to successfully holding a job. While we are at it we teach about a good family life, raising kids, and of course living a Christian life. We are building a real community here. The message of Christ really resonates because it spoken in the midst of a loving community that cares for their body, mind and soul.”

We were walking from Andrew’s office to his home just down the hill. It was the end of the work day and there was a cluster of young men sitting on their motorcycles in the shade of a tree. Andrew stopped to talk to them and then returned to us.

“See that young man there? Frankly, he didn’t like getting up and having to report to work every day. The work experience was all new to him. His assignment was to go into the villages and help local farmers that are raising chickens for us. He is to provide technical assistance and training, answer questions, and be our representative. He did his work but without any enthusiasm. It was hard to get him out of his office into the field.

“All of a sudden, he got ‘turned on’. He saw the impact that his work was having on people’s lives. Their income was rising, their families getting healthy, wells being dug. Now he rushes to work and he is hardly ever in the office.

“God has always worked. That’s how creation began. We become fulfilled when we work. As Jesus said, ‘My Father is working until now, and I Myself am working.’ When we work we experience God in a new way. It is vital to Christian life. Getting turned on to work and turned on to Jesus is somehow linked.”

Here is the vision and mission statements of Andrew’s chicken operation:

NEW HORIZONS MOZAMBIQUE
VISION: We are God’s raving fans as we do business and farming His way
MISSION: We link with rural farmers in our community to produce THE lowest cost chicken in the world.
VALUES: We do everything:
· With Excellence
· On Time
· Without Waste
· With Joy

These are not idle statements. While I was there I met a farmer who raised 1.5 kilogram chickens in 28 days with a 1.97 food to meat conversion ratio. This is world class production.

Now that’s tending the flock!

Food Part 10: Traders

(Note: this is a continuation of a series. To start at the beginning go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-1-farmers-markets.html

(Summary: the value chain break in the maize food process is identified as being connected to negative incentives for traders.)

We’re on a mission to solve an important puzzle: unlocking the mysteries of hunger in Africa. There’s not a shortage of food but people are hungry. To understand, we’re drilling into one part of the value chain of maize in one region of Tanzania.

So we’ve looked briefly at the maize farmers, traders, and mills. We see that nobody
trusts anybody. That’s very counterproductive to making a value chain work and clearly part of the problem. We also see that the farmers can’t sell their product and the mill can’t buy enough.

(Pictured: the shelling of maize by beating it with a stick on a table of open branches.)


There is enough dysfunction that everyone has some blame in the problem. But notice that the farmers are growing enough and would like to sell more. Also notice that the factories are big enough to buy more and have excess demand. So the farmers and the factories are doing their job at least beyond the capacity of the current system. Therefore, at least for the moment the heaviest part of the blame needs to be placed at the feet of the traders. So let’s take a more careful look at traders.

Traders fill valuable links in value chains in nearly every industry. It’s kind of neat that as a factory you can open your doors and not worry about sourcing your inputs or distributing your products. Hundreds of traders will show up with baskets, bicycles and trucks filled with the inputs you need and ready to distribute your product. The factory doesn’t have to lift a finger and invest in these solutions.

There are thousands of traders and they are often operating in the informal sector of the economy as unregistered businesses not paying any taxes. Many people want to be traders because many traders are wealthy.

Without traders, the economy wouldn’t work at all. They are a vital part of how things get done.

On the other hand, we see that trader model doesn’t work to meet the needs of the value chain, at least in the case of this maize value chain in the Iringa area.

It isn’t that the traders aren’t doing their job, even though I implied that. Actually, they are doing their job very well. They are responding to the incentives that are at work in the system.

It turns out that the trader is maximizing their profit. As good capitalists, they want to buy at the lowest price and sell at the highest possible. Here’s some of their strategy:

#1: Buying Low

The trader can buy at the lowest price if the farmer is also a borrower. As we have discussed elsewhere in this blog, these money lending schemes are common across the developing world. In this maize example, the trader loans to the farmer either the seeds or the capital to purchase seeds. The terms of the loan require the farmer to sell their crop to the trader – at a very low price. The trader wins three ways: they have a pre-negotiated right-to-purchase, they have a lower price, and they make money on interest on the loan.

And they win a fourth way: they keep the borrower poor enough that they never break the cycle and so they are trapped indefinitely.

Clearly the trader benefits substantially from such an arrangement. Why would a farmer ever agree to such an arrangement?

Easy answer: they don’t have a choice.

Life in the developing world is much more precarious than in the developed world. For example, even a small illness can wipe out one’s life savings to buy medicine. One’s saving includes next year’s seeds. And illness and death are not uncommon.


(Pictured: a maize farm in front of the mountains.)


All a trader need do is find someone who has suffered a setback and requires a loan to continue. As you can imagine, needy people are common in the poorest nations on earth.

(This is one of the reasons why microfinance is so needed in the developing world. Microfinance can help to prevent these endless cycles of poverty.)

There are important things to notice about this situation:
· The trader has an added incentive to buy low – extra low. Farmers that are well off are much less likely to be caught in such a cycle of money lending.
· In more helpful value chains, buyers want their sellers to be productive and healthy. This gives them a supply side that they can count on. This is not true in this value chain.
· It is not surprising that there is strong distrust between traders and farmers. Indeed, many farmers hate traders because they have been caught in a money lending cycle or their neighbors have.
· Since the trader is buying at such a low price, the farmer has added incentive NOT to sell. Of course the negotiations are long. Of course the farmer doesn’t like the buyer – doesn’t even want to sell to them. How can there be a successful negotiation when the parties dislike and distrust each other?

#2: Selling High

How does a trader sell at a high price? Another easy answer: supply and demand. If the factories had all (or close to all) the input they needed then the price would fall. Traders keep the factories desperate for input because that keeps the price at its highest. This explains why factories are operating consistently at 20-40% of capacity. This is the line of desperation where the price will be highest. They are still in business and can buy the product. Any lower and they fail (many do). Any higher and they become more independent, more profitable, and the price falls.

There is no need to have a conspiracy to set prices among traders. The numbers will speak for themselves.


Why are maize mills unable to source their maize from the nearby farmers? Puzzle solved!

This is an example of a broken value chain. It isn’t a lack of food that is causing hunger; it is broken value chains.


Next: The Invisible Hand


To continue this series go here: http://cheetahdevelopment.blogspot.com/2009/07/food-part-11-the-invisible-%20hand.html

Food Part 9: The Hunger Puzzle

July 7, Tuesday
Food Part 9: The Hunger Puzzle
(Food, Agri-business)

Pictures, Agriculture, 6/18 –Maize mill 2

(Note: this is a continuation of a series. To start at the beginning go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-1-farmers-markets.html

(Summary: a review of the maize value chain including farmers, traders, and maize mills raises the question of why doesn’t the food value chain work.)

So in our last installment we were talking about broken value chains and how solving them is not only a good business opportunity, it’s also the way to change thousands of lives. We were taking a look at the food value chain in particular because it is the source of many of the problems of hunger and poverty in Africa. The core problem isn’t a lack of food because 40% of the food goes to waste. The core problem is that the value chain doesn’t work.

As an example, we were drilling into one part of the value chain that is broken. Maize is a key staple in many parts of Africa. In the Iringa area, which is one of the largest maize producing areas of Tanzania, the maize mills producing flour struggle to get enough maize to run their operations. This seems strange because Iringa is surrounded by fields of maize in every direction.

Understanding this puzzle helps to unlock part of the mystery of why there is a problem with hunger when there is plenty of production.



(Pictured: maize farms in the village.)

The Maize Value Chain
Each of the maize mills tries to source their maize in the surrounding villages. They either buy from traders or act as their own trader to purchase the maize. A ‘trader’ is a type business person that is common in everywhere in the developing world. The traders are middlemen that buy and sell throughout value chains in nearly every type of industry. Indeed, they are often the only links between many parts of the value chain.

Drilling into this small segment of the maize value chain provides an example of the roles that traders fill. I took the time to meet with traders, too. In Iringa, the maize traders (often trading in a variety of agricultural products) go into the villages and negotiate with villagers to purchase their farm goods. This can be a frustrating experience for a trader. In time honored African tradition, the trader has to go through a negotiation that may last a half hour and result in no purchase. They do this from shamba (farm) to shamba, slowly acquiring the goods they are seeking to trade. I’ve been told that may take a whole week to fill one truck. The traders say that this is a frustrating process and you can’t trust the farmers. Makes you feel bad for the traders, right?

Why does it take so long for traders to fill their truck? Remember that in just one village, Ilambilole, there is 2000 tons of maize production.

So let’s take a look at the farmers. In the negotiation the farmer is likewise frustrated. They find that the trader is trying to buy their crop at about or below cost. If they are selling a crop that might have a little shelf life like maize or rice, the farmer knows that the lowest price is right at harvest when there is abundance and as time passes the price will rise. The farmer has the crop, thus is eating, they are selling their excess and therefore can afford to wait. Why sell your crop if you’re not going to make much on it?

Over the course of the year, the farmer can see an increase in maize prices of about 30%. The food factory will see an increase of about 100%. The trader enjoys the spread. The farmer still loses because without proper storage the maize crop will deteriorate about 30% - or about as fast as the price goes up.

By the way, the farmers say the same thing about the traders: “You can’t trust them.” For some the hatred of traders is intense. We’ll take a look at this in a bit.



(Pictured: a maize mill store front.)

So let’s take a look at the mill owners. They say their number one problem is getting enough input. Clearly, the traders are not delivering enough. The mill owners have a few choices. I have seen all of the following tactics used:
1. The mills can buy from the traders. Some larger mills are dealing with hundreds of traders.
2. The mills can become their own trader and go direct to the farmers. This is a huge project but some undertake it. It doesn’t provide big dividends because they become just one more trader wandering through villages. Anna Temu of Power Foods (featured elsewhere in these blogs) is considered an expert on farmer relations because she is dealing with thousands of them. Even when she tries to create enduring, helpful relationships with farmers, traders may step in take the crops out from under her. Proof that it’s not working: she could double her sales instantly if she could get more input.
3. The mills can go elsewhere and buy from a source that has a large supply. This is why one small mill in Iringa is going 600 killometers to Sangea to get maize.
4. The mills can go overseas for supply. I am told that the large grain elevators in the port city of Dar es Salaam are filled with grain from the USA, Canada and elsewhere. The need to find an aggregated source explains this importation of grain in a country that has an excess.

(There does seem to be inadequate production of soybeans, millet, and wheat. Actually, this failure in the value chain explains that, as well. Farmers that grow these ‘exotic’ crops are even more frustrated, often selling nothing.)

By the way, the mill owners generally don’t trust the farmers or the traders, either. How could they when they can’t keep their factories running?

This value chain puzzle remains unsolved.

I guess you’ll just have to read another installment of this series to find out why the value chain is broken.

To continue this series go here: http://cheetahdevelopment.blogspot.com/2009/07/food-part-10-traders.html

Food Part 8: Resources without Resuls

(Note: this is a continuation of a series. To start at the beginning go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-1-farmers-markets.html

(SUMMARY: Tanzania and much of Africa is blessed with significant resources. The potential of this opportunity is often unrealized. We drill into the value chains and find an example: food grown in a village is not available to be used only 25 Km away even though both buyer and seller want to link up.)

In our last installment we laid out our basic business strategies to address the broken food value chain in Africa. There are three basic concepts: Unite Farmers, Preserve Food, Add Value.

These three are built upon a common strategy: find places in the value chain that are broken. This is where the opportunity lies.

One of the questions I most often hear from locals is, “What do you think of Tanzania?” They want to know what a westerner sees – what is our point of view. As a business person, what I notice first is business. I can’t help it; it’s what my eyes are trained to see. In the case of Tanzania, what I have noticed most is the lack of businesses. Things we take for granted are missing from the landscape.

For example, although there is instant coffee it is very difficult to find a cup of fresh brewed; this in a country that grows some of the best coffee in the world. If you are a Starbucks or Caribou addict you would notice this immediately. (I’m not because I’m sensitive to caffeine.) Missing businesses may mean there is opportunity. To continue the example, a carefully located coffee shop might do very well.

More accurately, need usually equals opportunity. (This is the basic reason why there is a link between business and helping people.)

When Tanzanians ask me what I think of their country, I tell them that there is opportunity everywhere.
This is not a polite way to say a hard thing. It’s the truth. Tanzania is blessed with substantial resources:
· Perhaps 6% of the fresh water on earth, including large amounts of hydroelectric power, and lakes to rival the US Great Lakes.
· Enormous mineral reserves.
· Coal was recently discovered.
· It is rumored that oil was just discovered.
· Some of the most beautiful areas on earth including the Serengeti, Mt. Kilimanjaro, Goro Goro Crater, wildlife in abundance, etc.
· Huge tracts of arable land and eco-diversity that can support the raising of nearly any agricultural crop.
· A peaceful, hardworking people that have lived in a stable democracy since 1961.

Tanzania is not alone. Africa is blessed with abundant resources across the continent. The problem is that the value chains across nearly every industry are broken. Three notable exceptions: soda pop like Coke and Pepsi, beer, and cellular phones. These three are available everywhere – even remote villages. Soda, beer, and cell phones are not exactly life’s key staples. It’s ironic that sometimes the only clean drinking water you can get is a bottle of pop. However, it’s proof that given a focused effort, things really can work. You can get a bottle of orange Fanta® even in a remote village!

As a business person, what I see is business; in this case, broken value chains. Opportunity is created when you can serve a need. That’s why “necessity is the mother of invention.” The most important needs are in the middle of value chains because they serve so many people by connecting products from source to user. Therefore, when you follow the value chain and see where it doesn’t work it’s like following the rainbow to a pot of gold. These are the real key business opportunities. And this is where you can really change a lot of lives.

(Picture: meeting with a maize mill owner in Iringa.)

When I went to Tanzania, I started by speaking to a number of factories, including food factories in the first few weeks. The food factories I visited were running at about 20-30% of capacity. (Actually, this was common in factories of every type.) Without exception, food producers said that there number one problem is getting enough input. Everything that they make they sell that day. I sat with the CEO of a leading food producer while she took call after call from people wondering why they aren’t receiving the orders they have placed. The problem isn’t lack of market; its lack of input. Management often puts a majority of their effort into sourcing their raw food stuffs.

As I explored the country, this problem replayed itself over and over for every type of food. The caterer at Tumaini University in Iringa is struggling to feed students and staff because she can’t source enough chicken, eggs, vegetables, etc. She is now opening her own truck farm to grow her own vegetables. Chickens were such a problem that she wanted me to invest in a chicken farm for her. In fact, the 2nd largest chicken farm in the country is owned by a caterer in Dar es Salaam. Sourcing food is incredibly difficult and one of the value chains that is most broken.

Because hunger is such a terrible problem, I kept digging.

The Iringa area is one of the four largest maize growing regions in Tanzania. Iringa town is surrounded by hundreds of villages where fields of maize are ubiquitous. I have been in many, many of these villages and literally met with hundreds of farmers. The farmer’s number one problem: they can’t sell what they produce. In the village of Ilambilole, we spent time quantifying the maize production. This village of 1000 families probably produces about 2000 tons of maize per year.

Back in Iringa town I met with four simple operations whose primary business was to purchase maize and mill it into flour. Each of these businesses had the same number one problem: they couldn’t get enough maize!

And they are in the heart of maize country! 25 kilometers away, one village could supply much of their needs. One of these mills was sending trucks 600 kilometers to get their supply!

I like cross word and other puzzles. Getting my head wrapped around this problem was one of the most compelling challenges of my life. Not because it is so tricky but because it is so important. We are talking about the heart of the hunger problem in Africa. Remember, there is no shortage of food production and 40% of what is produced rots. Although not that complex, it took me about a week to see what was happening.

Getting to the ‘aha’, ‘eureka!’ moment is really satisfying. I think it will be for you, too.

To continue this series go here: http://cheetahdevelopment.blogspot.com/2009/07/food-part-9-the-hunger-puzzle.html

Food Part 7: From Subsistence to Substance

(Note: this is a continuation of a series. To start at the beginning go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-1-farmers-markets.html

In the last installment of this series, we talked about how complex the problem of hunger is – and that source of hunger is not the lack of production. The source is a broken value chain. In this installment we will present straightforward concrete steps that can address many of these problems. Is it easy to accomplish? No, and it’s definitely harder than just giving away food. But it can make a lasting change.

(Pictured: a village farm.)

Cheetah uses an innovative model of micro-venture capital. This model combines micro-finance and venture capitalism by way of university partnership. As a result, the cost of investing is lowered and we are able to provide investments in small businesses in the developing world. (To learn more about this approach and its many benefits, please visit our website at http://www.cheetahdevelopment.com/ )

We are now working on applying this model to the food value chain.

As we have previously said, business is the only successful model for economic development in the history of the world. The vast majority of the problems of hunger in Africa do not stem from lack of production, they stem from lack of an effective food value chain: purchasing, transportation, storage, processing, preservation, etc. These are all businesses! The solutions do not lie in giving away food. They lie in creating businesses. How do you do that? You invest and mentor and you do it strategically. You invest in agribusiness.

What does strategic investment look like?

Well let me first say what it doesn’t look like because I think there are some myths that have been created by western perceptions:

• It’s not bringing western farming methods with big tractors, plows, etc. Remember, the core problem is not production; it’s value chain. African countries are 70-90% subsistence farmers; they cannot proceed in one fell swoop to the western model of 3%. No one would have a job and dependency would be worse than ever.
  
• It’s not rushing to build gigantic western style food factories. The local value chain is too fractured for that. Neither enough commodity inputs nor the effective distribution to receive and sell all of the production is currently unavailable. No, the economy must grow from the ground up just like economies always have. And just like Brazil, Russia, India and China, it can happen quickly. But that means economic investment not drowning in donations.

(Pictured: rice waiting to be milled.)

• I think a desire for western style production has caused too much emphasis on exportable commodities like coffee, tea, sugar, chocolate, and vanilla. How much coffee, tea and sugar can the world really use? (Though in my opinion, it can always use more chocolate – ha!) And notice two other things: with this approach local people are not fed and local value chains are not fixed. One good thing: some local people have a successful business and income though they are very interlocked with western economic swings.
  
• Finally, to the disappointment of many locals, it does not involve investing in any individual farmers. That’s picking winners and losers and the value chain is still broken. Rather it is finding businesses that can benefit many, many farmers and many, many consumers and demonstrating that the value chain can work.

On the positive side of the coin, what is Cheetah’s agribusiness investment strategy? It’s deceptively simple. It’s finding agribusinesses to invest in that primarily fall in the following three categories:

1. Unite Farmers: Bring farm production from many farmers together to increase value and provide reliable, consistent food processing inputs

2. Preserve Food: including in large volumes and not just flavoring sauces and jams, which are common.

3. Add Value: move from food commodities to products through improved quality, unique characteristics, processing, etc.

Stop.

Don’t jump over this list. It is the heart of our discussion. This is how Cheetah will work to address hunger through small businesses.

(Pictured: brooms made from maize stalks and sunflower oil.)

In the previous blog on this subject, I listed at least 14 ways the food value chain is broken in Africa. It is a complex and interwoven subject.

However, the three investment strategies laid out directly address all of these problems but a few: drought, government disincentives like inappropriate taxes, and corruption. But even these three are partly solved by our strategies and our micro-venture capital model of investment:

1. Drought: widespread drought and famine are one type of problem and relatively rare. The more common problem is localized droughts. Here the solution is to have a working food value chain so one region’s production can serve another. However at this time, production in the rural area is not even effectively reaching the nearby town.

2. Government disincentives: governments in Africa are becoming far more open to being supportive of investments and are commonly creating agreements to protect and support investors and even expedited processes to do so. Governments are slowly waking up to the fact that aid tends to kill their economy and investment builds it. We are working to structure our investments with these protections.

3. Corruption: the micro venture capital model from Cheetah involves strong university involvement. This assistance helps to shield the businesses from government corruption on the outside and root out business corruption on the inside.

(Pictured: food coming to market.)

So, three straightforward BUSINESS investment strategies: unite farmers, preserve food, and add value.

I emphasize ‘business’ because without this approach it will fail. For example, a farmer’s cooperative for its own sake is a club. A cooperative for business will be a holistic solution that makes sure that production is hooked successfully to the market.

In this context ‘business’ can mean sustainable, transparent, and results oriented: the way to change people’s lives. People really can move from subsistence to substance.

There is a way to end hunger.

We will start by making a dent:
Though small, it will be sustainable.
Though small, it will bring lasting change to the people involved.
Though small, it will be replicable.
Though small, it is designed to grow.

We will emulate the mustard seed and spread like a weed.

This is an innovative but difficult project. We need the help of thousands to succeed. Won’t you join us? Go here to learn how: http://www.cheetahdevelopment.org/How_to_help.htm

Next: the Model Village Project. To continue this series, go here: (Not yet posted).

Food Part 6: Chained by Broken Chains

(Note: this is a continuation of a series. To start at the beginning go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-1-farmers-markets.html

Many people care about the fact that so many are hungry in the developing world. We are shown pictures on TV of emaciated people and are asked to take action by donating. But what we know about the root causes of hunger is usually very limited. In this blog, I will not show any pictures. For right now, I want you to think hard.

If you care about the problem of hunger, I ask you to be patient and walk with me in the muck and mire where this problem is stuck. If there were easy answers, it would have been solved long ago, because many people genuinely care and much money has been spent.

In Tanzania and most of Africa, the problem is not lack of production. Tanzania produces more food than it needs and 40% of it rots every year. I saw a study that claimed that Uganda could by itself feed much of Africa.

(IMPORTANT!) Therefore, when you talk about hunger, you’re talking not about growing more. You’re talking about better delivery of what is there: what is often called the ‘value chain’.

The problems in the food value chain are many and varied in Tanzania and are shared in various forms across much of Africa. The example of this that I have been providing in the previous blogs might be viewed as overly generalized and simplified. However, there are some common threads to these stories and hundreds more that I have seen. Here are some of the aspects we frequently see:

• The incentives for production efficiency are often missing or negative. For example, farmers don’t see any point in growing more because almost half of the food they grow rots. Middlemen benefit from keeping farmers poor (more dependency by farmers) and supplies to factories low (higher prices when delivered). Animal feed companies are few in number or hiding because of a high and inappropriate VAT tax.
  
  
• Food production tends to come to market all at once and receive low prices.
  
  
• There is very little food preservation. Even simple technologies like hot-water-bath canning, smoked meats, drying are rarely known or used.
  
  
• Most of the sourcing and transportation of food is done by very large numbers of middlemen. Their incentives are counterproductive (see above) and there is no reliable source or movement of food in any consistent fashion. They often make a significant portion of their income through money-lending schemes that keep farmers as bond-servants.
  
  
• The price of trucking is often based on the value of what is moved not weight/volume/distance. This takes advantage of the producers and is a tax on the high value products.
  
  
• The process of sourcing food usually involves negotiating with very large numbers of individually small farmers (thousands). A negotiation may end without a purchase.
  
  
• There is very little trust by members of the value chain for each other. This is exacerbated by the middlemen (currently the key value chain link) who are the least trusted of all.
  
  
• In the past, farmer cooperatives have failed numerous times and were sources of corruption that stole from the poorest of the poor. They are not trusted today.
  
  
• Erratic weather patterns create local droughts and unreliable production.
  
  
• Because of the challenges of sourcing local food (and because of national selfishness) famine relief is purchased within the donor nation (say, in the USA) rather than within nearby countries. This practice keeps local farmers poor by flooding local markets with free food.
  
  
• Famine relief and aid organizations often keep giving when the problem has ended. Ethiopia used to be a food exporting nation. In the west we don’t know that it is a green, verdant and beautiful place because we see pictures on our TV from the deserts in one corner. After a famine more than a decade ago, aid organizations continued to ship ‘relief’ food from the west because for a variety of reasons, none of them very good. After a few years of unneeded aid, most of the local farmers were put out of business. Now Ethiopia really does need the aid and so that’s why they are still on our TVs.
  
  
• The approaches to change are usually not holistic. Many aid and government organizations are focused on ‘dollars of giving’ as the key measure of success rather than ‘income change (profit)’. Development usually fails to address a sufficiently wide part of the value chain to bring change.
  
  
• Big business development tends to fail because it is not prepared to deal with the highly fractured nature of local producers or local markets. It also usually leaves most of the most needy out of the value chain.
  
  
• Because these problems are so complex, it’s easier to just give donations than to make lasting change.
  
  

These are just some of the problems. I want to make it clear that our view of this situation is not simplistic.

But remember where we began: when you talk about the problem of hunger, you’re talking not about growing more. You’re talking about better delivery of what is there: what we call the ‘value chain’.

I will not show you pictures of starving people like you see on TV.

It is degrading. It misses the point. I have even heard it called ‘poverty pornography’. We feel guilty and send $10 and then feel better. But nothing really changes.

In your mind’s eye I want you to see that these people are like you.

They are hopeful. They work hard. They have families. They are smart and resourceful – creating something from seemingly nothing. But they bury too many of their children and too often fail to see their children grow up. No matter how hard they work, fathers too often can’t take care of their families. I think that this is why many abandon their families: out of despair and a sense of failure.

And they are often hungry.

It doesn’t have to be this way. Truly.



Well, OK, here’s one picture.

Next: making a lasting difference. To continue this series go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-7-from-subsistence-to.html

Food Part 5: A Full Pot of Honey

(Note: this is a continuation of a series. To start at the beginning go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-1-farmers-markets.html

In our last installment on food, I made the case that it is better to invest than to donate. Here’s a story from the other side of that fence.

I made trip to a village called Kiwere. It is a small village south of Iringa kind of out in the bush. There are 13 producers of honey in this village and another 10 in outlying areas. Oddly, I kept bees for a few years myself when I was in university so I know a fair bit about the craft.

(Pictured: meeting in the beekeeper's house.)

An NGO (non-governmental organization) had come to their village and taught them how to keep safe bees, produce honey and beeswax, and donated the basic equipment to do this. The man who took me to visit Kiwere did so to show me the amazing value of honey because he wanted me to invest in his own creation of a beekeeping operation. A pastor who accompanied me said, ‘It is a treasure hiding among us that we just never even noticed.’

I was noticing something completely different.

The largest producer of the village hosted us, showing his operation from top to bottom. He had enormous volumes of honey, including four each 55 gallon drums full and a couple of 30 gallon drums. By African standards, the sanitary conditions were less than ideal.

(Pictured: a local hive of 'safe' bees.)

When I asked to purchase 20 liters (so I could share with students from Tumaini and the hostel I was staying at) we waited more than an hour for them to prepare it. It turns out that they were searching for a container to put the honey in. When we finally learned of this, we took a water bottle from the car, broke the seal, poured out our drinking water. I purchased a liter and a half. It was the only container we had.

The organization that donated the equipment and provided the training was well meaning but gets nearly a failing grade for results. They might give themselves an A+ because there is honey in production. But the point is that they missed the point.

(Pictured: some of the high quality stainless equipment provided.)

They were thinking like a typical aid organization that gives things away. This is the model that they follow.

…Warning: I’m stepping on a soapbox: It is easier to give away $100 million than to start a dozen successful small businesses. Chosen carefully, these small businesses can have an even wider impact than the $100 million and keep delivering that impact in increasing measure year after year. For a lot less money. And the money is paid back so it can be invested again. To take $100 million and invest it wisely is really hard to do. If you were given that much money in the US or Europe, you would be held to a very high standard.

(Pictured: drums full of honey that remains unsold.)


As was described to me, if you go to a conference of aid organizations, you are likely to hear the keynote speakers’ accomplishments in terms of how much they gave away and how fast. Not end results. Not sustainability.

I’ve been cautioned by people in the aid industry that to say or write this will probably get me in trouble with a lot of NGO aid organizations. And I do want to say, there is a lot of good being done by many organizations. But also a lot of dependency is being created and there is a lot of waste.

(Pictured: a solar powered separator that melts the honey comb wax and filters it.)

Back to the honey.

The NGO that did beekeeping work thought about honey but didn’t think holistically. In a business structure, you are forced to think holistically – the value chain from end-to-end or you fail. And when you failed, it would be clear because there is no profit. That is the built in discipline of business.

If the NGO had been helping to start a business, they would have been forced to deal with a much wider set of issues. Where will the honey be sold? How will it be packaged? What standards for processing will the buyer have?

(Pictured: the recovered bars of beeswax.)

Instead, poor farmers were moved from one crop that they were unable to sell like maize to another, slightly more glamorous one, honey. The poverty persists.


I have told the man that wants me to invest in a new beekeeping operation that he is missing the boat. Instead, of competing with beekeepers, he should find a way to organize the hundreds that dot the landscape. He could solve the core issues: food standards, packaging and marketing. That’s where the money is. And that’s how he could help hundreds of families.


(Pictured: the beekeeper is a leader in his village. You can tell because he flies a flag over his house, albeit tattered.)

But at Cheetah we are left with an understanding gap. When many well-meaning people hear that Cheetah Development is doing business development in the 3rd world, they often react as if we’re polluted by money. That somehow the drive for profit is a sign of an inferior model.

In this case profit equals sustainable.

It is widely agreed that the most important need in impoverished nations is for economic development. The lack of development is at the root of every problem (the reverse of ‘money is the root of all evil’ – which by the way is not in the bible.) Check some more facts: there has only been one successful model for economic development in the history of the world: business.

(Pictured: the local market we visited while they searched for a container to fill with honey.)

Business is a model that provides:

• discipline for success,
• built-in results-measurement and accountability,
• sustainability,
• and a sense of achievement for participants rather than emptiness.

People really don’t want to be given what they need.

At Cheetah, we use business as the model to help people. They respond joyfully. Energetically. They want to engage.

In the developed world we say to each other that ‘it is better to teach someone to fish than to give them fish.’ But we still feel somehow more self-righteous when we are giving the fish. Let’s stop this. And let’s go one better: let’s teach them to sell fish so that they can eat steak if they want – and afford to send their kids to school! Let’s help people get beyond subsistence. Together we can go beyond hunger, beyond barely enough food, to agribusiness. It really can be done.

(Pictured: women filling their buckets at the local well.)


Next: Cheetah’s agribusiness strategy. To continue this series on food, go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-6-chained-by-broken-chains.html

Food Part 4: Working Together Works

(Note: this is a continuation of a series. To start at the beginning go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-1-farmers-markets.html

How can a tea truck save the lives of babies? Let’s continue our trip to the tea farm in Tanzania.

The tea that the farmers pick must be transported from the farm to the factory. Its value deteriorates quickly with time – in a matter of hours. The tea must be retrieved from 28 collection points spread over 30 kilometers and then taken another 30 kilometers to the factory. The roads are very rough, winding and narrow. The peak season is when it is raining so they are filled with mud and slippery besides.

The delivery is provided by a contractor hired by MTC that operates around two trucks to their benefit. The contractor is paid by MTC 20 shillings per kilogram or almost 15% of the value of the tea. The contractor does not have an incentive to deliver the tea quickly because their payment is nearly assured. As a result, the tea is often delivered in poor condition affecting the ability of Mkonge to negotiate a good price for their tea. At peak tea production time, the contractor has their attention diverted by high demand of other farms and may fail to even pick up tea in time for delivery.

What the Mkonge family farmers need are a couple of trucks to deliver the tea themselves. We calculate that the trucks will be paid for in about 18 months and then incomes will rise almost 10% per family just to receive the difference in shipping. But this improvement should afford Mkonge farmers the ability to negotiate a better price for their tea, as well. Here’s a picture of the type of truck that they need (it has a 7 metric ton capacity):




You may see this as a truck. It is so much more.

It is documented that a 10% rise in income = a 6% decrease in infant mortality. This is the index of human health that describes the relative health of the entire community. There is a direct relationship between income and health among the world’s poor. Consider that in Tanzania about 11% of babies fail to make it to age 1. Or that a woman’s chance of dying in child birth makes every child born a risk to the entire family.

Do not get lost in the numbers and statistics. I spoke today to a young man at Tumaini University who has become my friend over the last year, Hosea Mpogole. He just lost his six month old baby. These are real people with real losses. There are many who have lost multiple children.


Infant mortality is the index to all human health. Babies don’t survive when human health conditions are poor. For example, yesterday, I met a woman suffering with malaria and still trying to keep her job at an office. When you ask people if they have ever had it, most have survived it multiple times. But it is a constant threat to life. One woman said, ‘It is the prayer of the day.’

And it isn’t just health that is affected. Increased income is directly correlated to a variety of factors. Consider that increased incomes…
= lower birthrates
= higher education rates
= less child oppression
= less domestic violence & more stable families
= more rights for women

OK, back to Mkonge: It is tempting to think that maybe we should donate a couple of trucks. This is the wrong approach for a variety of reasons:

1. It has been demonstrated that economic growth saves more lives than income redistribution. This is economist-speak for saying that investment is better than donations. Here is why:

2. The biggest opportunity for Mkonge is not the trucks. These trucks will have a limited life and need to be replaced. The biggest opportunity is to teach this association how to save and invest. Then they will be able to replace their trucks as needed and invest in a variety of other things that will continue to raise their income. To this end, Tumaini University will be engaging with us and assisting in teaching these skills and monitoring the maintenance and usage of the trucks.

3. Donating the trucks is not sustainable. They will need to be replaced. Who is prepared to make this kind of indefinite commitment? No one.

4. Donating the trucks fails to teach Mkonge how to profit on their investments. By requiring repayment, discipline is built in that teaches this important skill that will reap benefits for many generations. Again, Tumaini University will engage with us to assist in this.

5. If Mkonge demonstrates success in purchasing and paying for trucks the model can be replicated among many other tea associations in the area, across Tanzania and perhaps elsewhere. Based on Mkonge’s history of joint commitment and the fact that MTC is willing to pay Cheetah directly for the contractor’s value, repayment seems very secure. Literally, thousands of lives might be saved and the quality of life could rise for tens of thousands. Mkonge represents around 3000 people just in their association.

Mkonge is a living example of how bringing farmers together can change lives. It also shows how investments in the food value chain can raise incomes and do so more effectively than by donation. This is why Cheetah is looking for agri-business investments that achieve these kinds of objectives.

Next time you have a cup of hot tea or a glass of ice tea, think of the people of Mkonge and their babies. And perhaps to appreciate what a blessing you have – just look at the fact you have ice in the glass and that you don’t have to worry about the water or ice making you sick.

As we made the journey back to Iringa town, the sunset was spectacular as it sank among the mountains in the region.

To continue this series go here: http://cheetahdevelopment.blogspot.com/2009/06/food-part-5-full-pot-of-honey.html